Ethanol Weakens for Third Day Against Gasoline on Higher Returns

Ethanol weakened for a third day against gasoline, the longest streak of losses in a month, as higher returns for processing corn into the biofuel spurred companies to lift output.

The spread widened 1.71 cents to 37.59 cents a gallon as companies including Poet LLC, Abengoa SA (ABG) and Valero Energy Corp. (VLO) resumed production at idled mills. An April 24 Energy Information Administration report showed production rose to 853,000 barrels a day in the week ended April 19, 1,000 barrels shy of this year’s high. Renewable Identification Numbers for corn-based ethanol jumped the most in more than two weeks.

“It’s been picking up with the margin improving,” said Will Babler, a broker at Atten Babler Risk Management LLC in Galena, Illinois. “You almost expect that to continue.”

Denatured ethanol for May delivery rose 0.6 cent to $2.459 a gallon on the Chicago Board of Trade. Prices have gained 12 percent this year.

Gasoline for May delivery advanced 2.31 cents, or 0.8 percent, to $2.8349 a gallon on the New York Mercantile Exchange. The contract covers reformulated gasoline, made to be blended with ethanol before delivery to filling stations.

Manufacturing costs have eased as corn prices have tumbled on rising inventory estimates and projections that U.S. farmers would boost planting to the most since 1936.

Corn for May delivery decreased 1.25 cents to $6.44 a bushel in Chicago. One bushel makes at least 2.75 gallons of ethanol.

Crush Spread

The corn crush spread was 12 cents a gallon, up from 11 cents yesterday. That compares to minus 35 cents on Dec. 31. The amount doesn’t include revenue from the sale of dried distillers’ grains, a byproduct of ethanol production, which can be fed to livestock.

Poet, the second-biggest U.S. ethanol producer, said April 23 that it restarted operations at its Macon, Missouri, mill, two months after shutting the plant down because of a shortage of corn.

Stockpiles rose 0.5 percent to 17.6 million barrels last week, data form the Energy Department’s analytical arm show, down 19 percent from a year earlier.

Corn-based RINs jumped 9.6 percent to 68.5 cents, the highest price in a week and the biggest one-day gain since April 8, data compiled by Bloomberg show. , which cover biodiesel and Brazilian sugarcane-based ethanol, were unchanged at 77 cents.

RINs are certificates assigned to each gallon of biofuel to track compliance with government mandates. Once the fuel is mixed with petroleum, refiners can keep the certificate or trade it.

Ethanol Imports

Ethanol-blended gasoline made up 93 percent of the total U.S. gasoline pool last week, the lowest since March 29 and down 1.1 percent from the previous week, the most recent EIA report showed.

Imports of the biofuel averaged 39,000 barrels a day last week, the first time the U.S. has made foreign purchases since March 29, according to EIA.

Anhydrous ethanol in Sao Paulo fetched $2.64 a gallon last week, data compiled by Bloomberg show.

In cash market trading, ethanol was unchanged in Chicago at $2.48 a gallon and in the U.S. Gulf at $2.545, according to data compiled by Bloomberg. Ethanol in New York Harbor gained 7.5 cents to $2.695 a gallon and on the West Coast it climbed 2.5 cents to $2.70.

West Coast ethanol premium over Gulf Coast expanded 2.5 cents to 15.5 cents and Chicago’s discount to New York stretched 7.5 cents to 21.5 cents, the widest since Dec. 9, 2011.

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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