Ethanol Advances on Concern China Rate Cuts to Lift Corn Demand

Ethanol futures advanced in Chicago on concern that interest rate cuts in China will boost demand for commodities such as corn.

The biofuel gained 1 percent after the People’s Bank of China said the one-year lending rate will drop a quarter- percentage point to 6.31 percent starting tomorrow, stoking speculation that the country will boost corn imports. The grain is the primary ingredient in ethanol in the U.S.

“That pushed corn higher and corn pulled ethanol up,” said John Janney, a vice president at Citigroup Global Markets Inc. in Chicago.

Denatured ethanol for July delivery advanced 2.1 cents to settle at $2.073 a gallon on the Chicago Board of Trade, the highest level since May 25. Prices have fallen 5.9 percent this year.

In spot market trading, ethanol in New York gained 3 cents, or 1.5 percent, to $2.10 a gallon and in Chicago the additive increased 2 cents, or 1 percent, to $2.03, according to data compiled by Bloomberg.

Ethanol in the U.S. Gulf jumped 2 cents, or 1 percent, to $2.095 a gallon and on the West Coast the biofuel slid 0.5 cent to $2.21.

Corn for July delivery rose 7.75 cents, or 1.3 percent, to $5.94 a bushel in Chicago.

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