Ethanol futures plunged the most in 19 months in Chicago after a government report showed an unexpected increase in corn supply that would cut production costs for the biofuel.
The grain-based gasoline additive fell 6.5 percent after the Agriculture Department said corn inventories remaining from last year’s harvest totaled 3.67 billion bushels as of June 1, compared with a forecast of 3.29 billion bushels by analysts in a Bloomberg News survey.
“Ethanol is overreacting to the corn,” said Jim Damask, a manager at BiofuelsConnect, a Heathrow, Florida-based alternative energy broker. “It’s a bloodbath out here. It’s their main production cost.”
Denatured ethanol for July delivery fell 17.8 cents to settle at $2.555 a gallon on the Chicago Board of Trade, the steepest decline since December 2009.
In cash market trading, ethanol in New York sank 12.5 cents, or 4.4 percent, to $2.735 a gallon and in Chicago the additive plummeted 12.5 cents, or 4.5 percent, to $2.64, according to data compiled by Bloomberg.
Ethanol on the West Coast dipped 7.5 cents, or 2.6 percent, to $2.79 a gallon and in the U.S. Gulf the biofuel dropped 2.5 cents, or 0.9 percent, to $2.75.
Corn futures for December delivery fell the exchange limit of 30 cents, or 4.6 percent, to $6.205 a bushel in Chicago. One bushel can make at least 2.75 gallons of ethanol.
To contact the reporter on this story: Mario Parker in Chicago at firstname.lastname@example.org.
To contact the editor responsible for this story: Dan Stets at email@example.com.