Ethanol Falls on Ample Stocks and Narrower Discount to Gasoline

Ethanol fell for a second day in Chicago after supplies of the fuel grew and as its discount to gasoline narrowed.

Futures slipped as the spread between the biofuel and gasoline slid to 19.9 cents based on settlement prices, the lowest since July 18, making it less attractive to blend the two. Ethanol inventories in the week ended Oct. 12 were 11 percent higher than a year earlier, the Energy Department said in its most recent supply report.

“That blend margin has come in,” said Ian Jackson, a trader at SCB & Associates in Chicago. “Physically, it feels tight, but if you look at it on a stocks basis we’re nowhere near scary levels.”

Denatured ethanol for November delivery declined 1.9 cents, or 0.8 percent, to $2.406 a gallon on the Chicago Board of Trade. Futures have gained 9.2 percent this year.

In cash market trading, ethanol in Chicago decreased 3.5 cents, or 1.4 percent, to $2.40 a gallon and on the West Coast the additive dropped 3.5 cents, or 1.4 percent, to $2.545, data compiled by Bloomberg showed.

Ethanol in the U.S. Gulf slid 3.5 cents, or 1.4 percent, to $2.455 a gallon and in New York it fell 3 cents, or 1.2 percent, to $2.47.

Gasoline Futures

Gasoline for November delivery tumbled 4.25 cents, or 1.6 percent, to $2.605 a gallon in New York. The contract covers reformulated gasoline, made to be blended with ethanol before delivery to filling stations.

The motor fuel traded at a 99.8 cent premium to ethanol as recently as Sept. 28.

Corn for December delivery fell 5.25 cents, or 0.7 percent, to $7.56 a bushel in Chicago. One bushel makes at least 2.75 gallons of ethanol.

Based on December contracts for ethanol and corn, producers are losing about 36 cents on each gallon of the biofuel made, 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.

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