Ethanol’s discount to gasoline tightened to the smallest level in more than a week as plants idled and prices for the motor fuel sank for a third day.
The spread narrowed 0.8 cent to 68.65 cents a gallon, the least since Feb. 13. Biofuel Energy Corp. (BIOF), partially owned by venture capitalists David Einhorn and Daniel Loeb, said yesterday it would keep a closed ethanol mill in Fairmont, Minnesota, shut until this year’s corn harvest.
“With all the plants down,” ethanol is “going to hold strong,” said Michael Slider, director of biofuels at Elgin, Iowa-based Fauser Energy Resources.
Denatured ethanol for March delivery fell 1.5 cents, or 0.6 percent, to $2.35 a gallon on the Chicago Board of Trade. Futures have advanced 7.3 percent this year.
Gasoline for March delivery decreased 2.3 cents, or, 0.8 percent, to $3.0365 a gallon on the New York Mercantile Exchange, extending the longest streak of declines since Dec. 6.
At least 19 ethanol plants have shut since June to stem losses from higher corn prices following a drought and to help reduce a glut of the biofuel, according to the Renewable Fuels Association in Washington.
Corn for March delivery slipped 9.75 cents, or 1.4 percent, to $6.9075 a bushel in Chicago. One bushel makes at least 2.75 gallons of ethanol. Corn futures rose to a record $8.49 a bushel in August as drought in the Midwest cut yields.
The corn crush spread, representing gains or losses from turning a bushel of corn into ethanol, was minus 16 cents, compared with minus 18 cents yesterday. The amount doesn’t include revenue from the sale of dried distillers’ grains, a byproduct of ethanol production, which can be fed to livestock.
Ethanol production in the week ended Feb. 15 rose 1 percent to 797,000 barrels a day, a 17 percent decline from a record 963,000 barrels a day in December 2011, a report from the Energy Information Administration, the Energy Department’s analytical arm, showed today.
Slider said output won’t climb much higher until after the corn harvest in September, when profit may improve.
Stockpiles were little changed at 19.5 million barrels, the report showed, while imports almost doubled to 21,000 barrels a day from the previous week.
Spot ethanol in Sao Paulo cost $2.38 a gallon last week, according to data compiled by Bloomberg, more expensive than today’s futures price.
Ethanol-blended gasoline made up about 90 percent of the total gasoline pool, up from 89 percent, the EIA said.
The value of Renewable Identification Numbers, known as RINs, jumped 38 percent to 47 cents today from 34 cents yesterday for the conventional sort, Starfuels Inc., an ethanol broker in Jupiter, Florida, said today.
RINs are credits that help the government track whether refiners are meeting federal biofuel use mandates. End-users of the fuel may be concerned that gasoline demand and production of the biofuel aren’t robust enough to meet the targets and may be buying the RINs to satisfy their obligations, said Jerrod Kitt, an analyst at Linn Group in Chicago.
In cash market trading, ethanol in New York added 0.5 cent to $2.46 a gallon, while in Chicago the biofuel slipped 0.75 cent to $2.355, data compiled by Bloomberg show. The additive was unchanged in the U.S. Gulf at $2.405 and prices on the West Coast fell 0.5 cent to $2.52 a gallon.
New York Harbor’s premium to ethanol in Chicago expanded to 10.5 cents, the highest in a week, while the biofuel on the West Coast, the most expensive region in the nation, was 11.5 cents more costly than in the Gulf, the smallest gap since Feb. 12.
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