Ethanol futures climbed for a third day in Chicago on expectations that unprofitable production margins will curtail output.
Futures gained a day after Abengoa SA (ABG/P), a Spanish engineering and renewable energy company, said it will temporarily idle a Madison, Illinois, ethanol plant. That followed Biofuel Energy Corp.’s (BIOF) Sept. 24 decision to shut its 115 million-gallon-a-year plant in Fairmont, Minnesota.
“We saw Abengoa and we saw Biofuel Energy,” said Jerrod Kitt, an analyst at Linn Group in Chicago. “That’s a lot of it. We have an Energy Department report out tomorrow and it’s probably going to show more production declines.”
Denatured ethanol for October delivery advanced 2.7 cents, or 1.2 percent, to settle at $2.372 a gallon on the Chicago Board of Trade, the highest price since Sept. 14 and the longest streak of gains since Aug. 21. The futures have jumped 7.7 percent this year.
The Energy Department is set to release its weekly petroleum status report tomorrow at 10:30 a.m. in Washington.
Ethanol production in the week ended Sept. 21 fell 3 percent to 809,000 barrels a day, the least since July 27.
In cash market trading, ethanol in the U.S. Gulf sank 5 cents, or 2.1 percent, to $2.37 a gallon and in Chicago the additive decreased 4.5 cents, or 1.9 percent, to $2.315, data compiled by Bloomberg show.
Ethanol on the West Coast slipped 2 cents, or 0.8 percent, to $2.465 a gallon and in New York the biofuel declined 1.5 cents, or 0.6 percent, to $2.435.
Corn for December delivery gained 1.5 cents to $7.5825 a bushel in Chicago. One bushel makes at least 2.75 gallons of ethanol.
Based on December contracts for ethanol and corn, plants are losing about 39 cents on each gallon of the biofuel produced, according to data compiled by Bloomberg. That doesn’t include profit from the sale of dried distillers’ grains, a byproduct of ethanol production that can be fed to livestock.
Gasoline for November delivery dropped 5.09 cents, or 1.7 percent, to $2.8692 a gallon in New York. The contract covers reformulated gasoline, which is made to be blended with ethanol before delivery to filling stations.
The motor fuel narrowed its premium to ethanol to 49.72 cents from 57.51 yesterday.
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