OREANDA-NEWS. November 10, 2015. November is the month of Thanksgiving in the US, and if historical trends hold up, we’re about to see a price recovery that producers will appreciate.

Before I dive into the evidence, I would first like to apologize for being wrong in September. I guess my crystal ball was a little fuzzy when I suggested that we were about to see a downturn in prices. US ethanol prices for four consecutive years had lowered in September, but thanks to crop concerns and rallying corn prices, that streak was broken. Similarly, we saw another minimal gain in October.

So let’s try this again.

Across the last four years, the Platts Chicago Argo benchmark ethanol assessment has averaged a 37.5-cent rise in November.

Before you get too excited about that, understand that the bulk of those gains were made in the past two years. In 2014, the assessment rallied 98 cents from \\$1.82/gal on Halloween to close out November at \\$2.80/gal. In a spooky, scary coincidence, the assessment was also \\$1.82/gal on Halloween 2013 before gaining 59 cents to finish November at \\$2.41/gal.

The previous two years, however, we saw minimal declines of 2 and 5 cents, finishing at \\$2.41/gal in 2012 (another coincidence) and \\$2.72/gal in 2011.

Considering the Argo assessment finished this October at \\$1.6050/gal, what kind of trend should we expect to see in November 2015?

First off, just as a Midwest trader told me after I published the September blog, “We’re in uncharted territory right now, bro.” So there’s that grain of salt you have to take with this analysis.

But more importantly, what’s the climate like out there in the market? Is a rally even sustainable right now?

What’s been driving US ethanol prices for the past few weeks? Have the steady exports, the seasonably strong gasoline blending demand or the tumbling supplies sparked the recent uptick in prices? Or are the all-time high production rates seen in October keeping prices under the thumb?

Based on the evidence, the answer is far more simple — it’s none of them. It’s corn.

Of the 22 trading sessions in October, the Argo ethanol assessment followed the nearby corn futures settlement on the Chicago Board of Trade 19 times. The other three times occurred within a day of the weekly release of the US Energy Information Administration’s weekly ethanol data update.

In other words, if the supplies, production or demand data were having an effect on ethanol prices, it wasn’t sustainable in October.

The Argo assessment hasn’t touched \\$1.70/gal since last December, something that hasn’t happened since 2003. 2015 has been the least volatile year in the relatively short history of US ethanol prices, but there’s two months left for the markets to lose their minds.

Will we see a different trend in November or will ethanol prices continue to be bound to the price of their feedstock?