Ethanol Gains on Optimism Tax Credit Will Continue, More Demand
Ethanol futures gained a seventh day in Chicago amid optimism that incentives that support the industry will be extended and after a report showed unchanged consumption of the biofuel.
The fuel rose a day after the Senate passed an $858 billion tax-cut plan that would extend the 45-cent incentive to refiners and a 54-cent tariff on Brazilian imports. A government report yesterday showed production of conventional gasoline blended with ethanol was little changed at 4.97 million barrels a day, the highest level since Oct. 22.
“There continues to be really strong demand,” said Jerrod Kitt, an analyst for the Linn Group Inc. in Chicago. “The blender likes where we’re at. You’re somehow disappearing all this ethanol and that’s supportive.”
Denatured ethanol for January delivery rose 1.1 cents, or 0.5 percent, to settle at $2.187 a gallon on the Chicago Board of Trade, the highest price since Nov. 15 and the longest streak of gains since Nov. 3.
Kitt said the government incentives are the “main focus of the market.” They were set to expire at the end of this month. Refiners receive a 45-cent credit for each gallon of the fuel blended with gasoline.
A House vote on the tax package was delayed today because of a procedural dispute over the rules for debate.
The Energy Department report yesterday showed ethanol production was little changed at 937,000 barrels a day last week, near the record high of 939,000 set the previous week. Stockpiles of the biofuel climbed 2 percent to 16.7 million barrels.
An average ethanol mill in Iowa is losing 8 cents on every gallon produced while an Illinois plant is losing 3 cents a gallon on a spot basis, 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.
To contact the editor responsible for this story: Dan Stets at dstets@bloomberg.net.
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