Ethanol Rises to Three-Year High as Heat Threatens Corn Crop
Ethanol futures climbed to the highest price in more than three years in Chicago as a heat wave blanketing the Midwest threatens the corn crop.
The grain-based additive gained as temperatures reaching 100 degrees Fahrenheit (37.8 Celsius) move across the corn-rich U.S. Midwest. Ethanol is made mostly from corn in the U.S., with one bushel making at least 2.75 gallons.
“It certainly is related to the grain market,” said Rich Nelson, director of research at Allendale Inc. in McHenry, Illinois. “Though corn didn’t close at its highs, people are expecting higher prices due to the heat right now. The way ethanol is priced, which is off of corn, the two are directly tied together.”
Denatured ethanol for August delivery gained 3.6 cents, or 1.3 percent, to settle at $2.873 a gallon on the Chicago Board of Trade, the highest price since June 27, 2008. Futures have gained 78 percent in the past year.
In cash market trading, ethanol in New York advanced 2.5 cents, or 0.8 percent, to $3.065 a gallon and in Chicago the additive increased 2.5 cents, or 0.9 percent, to $2.935, according to data compiled by Bloomberg.
Ethanol on the West Coast jumped 1.5 cents, or 0.5 percent, to $3.075 a gallon and in the U.S. Gulf the fuel added 0.5 cents to $2.855.
Corn for December delivery rose 6.5 cents, or 1 percent, to $6.85 a bushel in Chicago.
On a spot basis, an average ethanol mill in Iowa is making 20 cents on every gallon of the fuel, while a typical plant in Illinois is pocketing 26 cents, according to Ag TraderTalk, a Clive, Iowa-based online grains information service.
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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