Ethanol Futures

What is Ethanol?

Ethanol served as lamp fuel in pre-Civil War United States and helped power early Model T automobiles. It is also the intoxicating ingredient in alcoholic beverages.

This alternative fuel is produced by fermenting and distilling starch crops that have been converted into simple sugars, and it is of great importance to today's energy industry. It's potential to reduce US dependency on imported energy has created a significant renewed interest especially in light of the fact that the U.S. is currently importing almost 60 percent of its oil from abroad.

Ethanol can be produced from sugar cane or corn. Also known as ethyl alcohol or grain alcohol, ethanol is used in beverages, in industrial products and as fuel. The largest single use of ethanol is as a motor fuel and fuel additive.

When used in reformulated gasoline (RFG) ethanol increases octane and improves emissions quality. In the U.S., corn is the preferred feedstock for ethanol production because of its low cost and high starch content; corn starch is converted to simple sugars and then to ethanol.

Ethanol Futures

Ethanol futures offer a way to limit price risk for ethanol producers, ethanol marketers and gasoline refiners. Energy industry participants are able manage their risk by securing in ethanol prices in advance through hedging with ethanol futures.

Ethanol prices are volatile and are governed largely by the supply and demand for ethanol in specific markets and by the needs of refiners for octane components and gasoline.

Contract Specifications

Each contract represents 30,000 gallons of ethanol. The ticker symbol is ET. Tick size is 0.001=$30. Ethanol futures are accessible for trading five days a week from 9:05 a.m. to 1:30 p.m. (CST) on the Chicago Mercantile Exchange's Globex electronic platform. Twelve consecutive contract expirations are available.