Futures  |  DEC 2007

Liquidity Of The Biofuels Market by Rick Kment

Liquidity Of The Biofuels Market by Rick Kment The ethanol futures contract is relatively young, but the market has tremendous growth potential. Here’s why. Since the early 1970s, the ethanol and biofuels industry has witnessed rapid and unprecedented growth. In the last couple of years in particular, the attention surrounding ethanol and biofuels has exploded on a national and global level. From celebrities and politicians, to activists and environmentalists, to the local farmers and table-talk pundits, everyone is weighing in on the topic. The biofuels industry has evolved from a sleepy, farmtown dream into a booming 21st-century phenomenon. Generally speaking, a young but profitable industry with massive growth potential usually brings out the eager investor in all of us. However, since the first ethanol futures contract debuted in 2004, it has generated relatively little interest and remains today an illiquid market. As the industry continues to evolve, many investors wonder if and when this fledgling market will begin to flourish. AN APPEALING MARKET The recent popularity and demand for biofuels has been propelled by two key factors: a governmental push to reduce the country’s dependency on foreign oil, and an increase in the development and implementation of environmental policies.

by Rick Kment