Ethanol Gains Against Gasoline as Discount May Spur Demand

Ethanol strengthened against gasoline on speculation the biofuel’s discount will spur increased blending.

The grain-based additive was 58.33 cents cheaper than gasoline, based on February futures for both commodities. That compares with 60.07 cents yesterday.

“That blend spread has gotten out there,” said Mike Blackford, a consultant at INTL FCStone in Des Moines, Iowa. “I’ve got to think we can buy into some demand.”

Denatured ethanol for February delivery fell 1.6 cents, or 0.7 percent, to settle at $2.181 a gallon on the Chicago Board of Trade. January futures, which expired today, dropped 0.4 percent to $2.17 a gallon. The front-month futures are down 2.6 percent in the past year.

Gasoline for February delivery slid 3.34 cents, or 1.2 percent, to $2.7643 a gallon on the New York Mercantile Exchange. The contract covers reformulated gasoline, which is made to be blended with ethanol before delivery to filling stations.

In cash market trading, ethanol in Chicago decreased 1 cent, or 0.5 percent, to $2.18 a gallon and in the U.S. Gulf the additive decreased 1 cent, or 0.5 percent, to $2.235, data compiled by Bloomberg shows.

Ethanol on the West Coast declined 1 cent, or 0.4 percent, to $2.34 a gallon and in New York the biofuel climbed 0.5 cent to $2.28.

Corn for March delivery tumbled 9 cents, or 1.3 percent, to $6.8025 a bushel in Chicago. One bushel makes at least 2.75 gallons of ethanol.

Based on March contracts for corn and ethanol, producers are losing 28 cents on each gallon of the fuel made, down from 29 cents yesterday, according to data collected by Bloomberg. The figures exclude the revenue that can be made 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

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