Ethanol Futures Soar to Seven-Month High in U.S. on Increased Corn Demand

Ethanol futures soared to a seven- month high in Chicago as corn advanced after a report showed increased demand for U.S. exports.

The grain-based additive followed its primary ingredient higher after the Agriculture Department said U.S. exporters in the week ended Aug. 19 sold 1.694 million metric tons of corn for delivery after Sept. 1, more than double from a year earlier. One bushel of corn distills into about 2.75 gallons of ethanol.

“We’re at the highest level since January or so,” said Rich Nelson, a director of research at Allendale Inc. in McHenry, Illinois. “It’s partially related to the corn. You have arguments on yields and at the same time you have a ravenous export market.”

Denatured ethanol for September delivery rose 5.6 cents, or 3 percent, to $1.906 a gallon on the Chicago Board of Trade, the highest price since Jan. 8 and the steepest one-day advance since June 30. Futures have gained 12 percent this month and are heading for for its best month since June 2008.

In cash market trading, ethanol on the West Coast dropped 2 cents, or 1 percent, to $2.065 a gallon and in New York the additive jumped 9.5 cents, or 5 percent, to $2.015 a gallon, according to data compiled by Bloomberg.

Ethanol in Chicago gained 6.5 cents, or 3.7 percent, to $1.845 a gallon and in the U.S. Gulf the biofuel advanced 4 cents, or 2 percent, to $2.04.

Blending Waiver

Nelson said ethanol prices have also increased amid optimism the U.S. Environmental Protection Agency will approve a waiver to allow higher concentrations of the additive in gasoline this fall.

The agency said June 17 that it expects testing to determine the impact of higher blends on vehicles built after 2007 by the end of September and that it can render a verdict sometime this fall.

Corn futures for December delivery rose 12 cents, or 2.9 percent, to $4.32 a bushel in Chicago, the biggest gain since July 30. The most-active contract, which reached a 13-month high of $4.39 on Aug. 5, has gained 6.2 percent this month after Russia halted grain exports for the rest of the year because of drought.

An average ethanol mill in Iowa is earning 18 cents a gallon on a spot basis, and a distillery in Illinois is pocketing 17 cents, according to Ag Trader Talk, an online grains information service in Clive, Iowa.

To contact the reporter on this story: Mario Parker in Chicago at mparker22@bloomberg.net

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