Ethanol Heads for First Monthly Drop Since May on Ample Supply

Ethanol futures fell in Chicago, heading for the first monthly drop since May, after a government report showed ample supply of the biofuel.

Futures declined after an Energy Department report yesterday showed that the industry’s 15 percent production cut to 819,000 barrels a day from a record 963,000 on Dec. 30 hasn’t been enough to trim supply. Stockpiles at 18.5 million barrels last week, little changed from the previous week, were 3.4 percent higher than a year earlier.

“Production’s certainly slowed, but it’s not enough,” said Jason Ward, an analyst at Northstar Commodity Investments in Minneapolis.

Denatured ethanol for September delivery fell 1.9 cents, or 0.7 percent, to $2.587 a gallon on the Chicago Board of Trade. The futures have dropped 1.6 percent this month.

Prices have also been pressured by imports, said Mike Breitenbach, an analyst and trader at Blue Ocean Brokerage LLC in New York.

The U.S. imported 22,000 barrels of ethanol a day in the week ended Aug. 24, the Energy Department said yesterday, compared to none a year earlier.

In cash market trading, ethanol increased 2.5 cents, or 1 percent, to $2.635 a gallon in the Gulf and gained 1.5 cents, or 0.6 percent, to $2.655 in New York, data compiled by Bloomberg shows. Ethanol in Chicago rose 1 cent to $2.58 a gallon and on the West Coast, the biofuel jumped 0.5 cent to $2.725.

Corn Prices

Corn for December delivery dropped 5 cents, or 0.6 percent, to $8.085 a bushel in Chicago. One bushel of corn makes at least 2.75 gallons of ethanol.

Gasoline for September delivery slid 1.77 cents, or 0.6 percent, to $3.0826 a gallon on the New York Mercantile Exchange. Prices have gained 15 percent this year.

Refiners, required by the U.S. to blend about 13.2 billion gallons of ethanol into gasoline this year, may use more than the government requires as they stand to pocket the difference between the two fuels.

The value of Renewable Identification Numbers, known as RINs, tumbled 17 percent to 2.95 cents, data compiled by Bloomberg show. They are credits that help the government track whether refiners are meeting 2012 federal ethanol use mandates.

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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