U.S. ethanol producers stung by collapsing prices are seeking changes to the way benchmark values for the biofuel are established, arguing the current system used by exchanges is vulnerable to manipulation, according to sources.
KFGO reports the push comes as the key farm belt industry struggles with weak demand growth, a loss of export markets due to the U.S. trade war with China, and aggressive selling by global commodities giant Archer Daniels Midland Co that have pushed ethanol prices to 13-year lows.
ADM is better placed to survive a long stretch of low prices than its ethanol-focused U.S. rivals, many of whom are concerned the company is deliberately pressuring the biofuel market lower to drive them out of business and are keen for a stable hedging tool to defend against further dips.
POET LLC has asked the CME Group to change its pricing method for a key swap contract used by the industry to hedge, and the rival ICE exchange is contemplating offering an alternative to CME's product after discussions with biofuels companies.
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