Ethanol Ends Five Days of Losses Against Gasoline on Corn Gains

Ethanol snapped a five-day streak of losses against gasoline as corn prices advanced.

Futures rebounded from a six-month low as corn gained on speculation that a 6.1 percent price decline this month will spur more demand from overseas buyers, raising costs to convert it into ethanol in the U.S. Gasoline fell as House Republicans delayed a vote on measures that would prevent tax increases and spending cuts from taking effect in January.

“We may have seen a little temporary low,” said Mike Blackford, a consultant at INTL FCStone Group in Des Moines, Iowa.

Ethanol’s discount to gasoline narrowed to 50.97 cents a gallon, based on futures settlements. It was 54.63 cents yesterday, the highest price since Oct. 10. The differential has averaged 61.02 cents this year.

Denatured ethanol for January delivery advanced 1.7 cents, or 0.8 percent, to settle at $2.225 a gallon on the Chicago Board of Trade, up from the lowest price since June 26. Futures have fallen 7.6 percent this month.

Blackford said volume is light today because many traders have left for the Christmas holiday. Forty-nine contracts traded, compared with 335 yesterday.

In the cash market, ethanol in New York added 5.5 cents, or 2.4 percent, to $2.32 a gallon and on the West Coast the additive jumped 4 cents, or 1.7 percent, to $2.355, data compiled by Bloomberg show.

Spot Trading

Ethanol in Chicago added 2.5 cents to $2.21 a gallon and in the U.S. Gulf the biofuel slipped 1 cent to $2.265.

Gasoline for January delivery slumped 1.96 cents, or 0.7 percent, to $2.7347 a gallon on the New York Mercantile Exchange. The contract covers reformulated gasoline, made to be blended with ethanol before delivery to filling stations.

Corn for March delivery rose 5.5 cents, or 0.8 percent, to $7.02 a bushel in Chicago. One bushel makes at least 2.75 gallons of ethanol.

Ethanol plants this year have faced poor margins to produce the fuel because of higher corn or feedstock prices, an ethanol supply glut and lackluster demand, Blackford said.

Based on March contracts for corn and ethanol, producers are losing 29 cents on each gallon of the fuel made, excluding the revenue that can be pocketed from the sale of dried distillers’ grains, a byproduct of ethanol production that can be fed to livestock, according to data collected by Bloomberg.

Ethanol stockpiles in the week ended Dec. 14 were 20.8 million barrels, 18 percent higher than a year ago, the highest level for this time of year since the Energy Department began tracking weekly data in June 2010.

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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