Ethanol Falls to Three-Week Low as Corn Declines on Weather

Ethanol futures fell to their lowest level in three weeks as corn declined on predictions of favorable weather in South America.

Brazil and Argentina, where rain is forecast, are the world’s biggest exporters after the U.S. The grain is the primary ingredient in U.S.-produced ethanol.

Denatured ethanol for February delivery slipped 1.2 cents, or 0.5 percent, to $2.24 a gallon on the Chicago Board of Trade, the fifth consecutive decline and the longest since June 29. That’s the lowest price since Dec. 17.

“It’s all stemming from weakness in the corn market,” said Terry Reilly, an analyst at Citigroup Global Markets Inc. in Chicago. “It was a little bit weaker because of the corn market.”

Futures are 17 percent higher than a year ago.

In cash market trading, ethanol was unchanged in the U.S. Gulf at $2.40 a gallon. In New York, the biofuel increased 0.5 cent to $2.395, according to data compiled by Bloomberg.

Ethanol on the West Coast advanced 4.5 cents, or 1.9 percent, to $2.47 a gallon while in Chicago it slipped 1.5 cents, or 0.7 percent, to $2.30.

Corn futures for March delivery dropped 7 cents, or 1.2 percent, to $5.95 a bushel in Chicago. The grain lost 5.4 percent for the week, the first weekly decline since Nov. 19. The price reached a 29-month high of $6.34 on Jan. 3. One bushel distills into about 2.75 gallons of ethanol.

Chinese Duties

Today’s decline in ethanol came a day after the U.S. Grains Council said the Chinese government’s anti-dumping investigation of U.S. dried distillers grains, a corn-based byproduct of ethanol production used to feed livestock, may result in duties as high as 100 percent, compared with the current 5 percent.

China imported about 2.8 million metric tons of dried distillers grains last year and the U.S. exported 8.5 million metric tons, according to data from F.O. Licht, a research company based in Ratzeburg, Germany.

Reilly said that could lower demand for the feed and reduce profitability of ethanol plants.

An average ethanol mill in Iowa is losing 8 cents on every gallon produced while an Illinois plant is losing 4 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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