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Ethanol Falls Second Day on Lower Costs and Economic Concerns

Ethanol futures declined for a second day in Chicago after a government report signaled lower production costs and on concern that the euro-region debt crisis will spread.

The biofuel fell after the Agriculture Department said corn inventories will be 801 million bushels Aug. 31, above the 715 million forecast in a Bloomberg News survey. Futures for corn, the primary feedstock in U.S.-made ethanol, fell. Spanish and Italian bond yields surged, fueling speculation of a worsening debt crisis.

“Just overall we had macro-driven selling,” said Matt Janney, a trader at Citigroup Global Markets Inc. in Chicago. “We also had the big report today out on corn.”

Denatured ethanol for May delivery fell 3.3 cents, or 1.5 percent, to settle at $2.229 a gallon on the Chicago Board of Trade, the lowest price since March 29. Futures have gained 1.2 percent this year.

In cash market trading, ethanol in the U.S. Gulf dropped 2 cents, or 0.9 percent, to $2.26 a gallon and in Chicago the additive decreased 1.5 cents, or 0.7 percent, to $2.205, according to data compiled by Bloomberg.

Ethanol on the West Coast declined 1.5 cents, or 0.6 percent, to $2.37 a gallon and in New York the biofuel slipped 0.5 cent to $2.30.

Corn futures for May delivery slid 14.25 cents, or 2.2 percent to close at $6.3475 a bushel in Chicago, the biggest drop since March 29.

Gasoline for May delivery tumbled 4.71 cents, or 1.4 percent, to settle at $3.2496 a gallon on the New York Mercantile Exchange. The contract includes reformulated gasoline, which is made to be blended with ethanol before delivery to filling stations.

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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