Ethanol Caps Longest Rally in Three Weeks on Output

Ethanol futures in Chicago capped the longest streak of gains in more than three weeks on supply reductions.

Futures climbed a day after Valero Energy Corp. (VLO), the third- biggest U.S. ethanol producer, said on an earnings conference call that it idled plants in Albion, Nebraska, and Linden, Indiana, because of poor margins and is operating three of its mills at reduced rates. U.S. production of the biofuel is down 17 percent this year, the Energy Department said Oct. 24. The agency will publish weekly output figures tomorrow.

“As for a specific trigger, the earnings calls probably spooked people yesterday,” said Jerrod Kitt, an analyst at Linn Group in Chicago. “People are looking for a draw tomorrow.”

Denatured ethanol for November delivery rose 2.3 cents, or 1 percent, to $2.436 a gallon on the Chicago Board of Trade, the highest price since Oct. 11. Futures gained 3.9 percent in October and have advanced 11 percent this year.

In cash market trading, ethanol was unchanged in New York at $2.47 a gallon, in Chicago at $2.395 and on the U.S. Gulf and West coasts at $2.46, data compiled by Bloomberg shows.

Corn for December delivery gained 14 cents, or 1.9 percent, to $7.5575 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 33 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.

Distillery Operations

Green Plains Renewable Energy Inc. (GPRE), the fourth-largest U.S. ethanol producer, said today that it plans to operate its distilleries at about 92 percent or 93 percent of capacity during the fourth quarter.

Gasoline for November delivery increased 3.3 cents, or 1.2 percent, to $2.7618 a gallon in New York. The contract covers reformulated gasoline, made to be blended with ethanol before delivery to filling stations. The November futures expired at the close of floor trading today. The more-active December contract increased 1.48 cents, or 0.6 percent, to $2.6303.

Ethanol’s discount to the motor fuel narrowed to 32.58 cents from 31.58 cents yesterday. Gasoline traded at a premium of 99.8 cents to ethanol as recently as Sept. 28.

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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