Ethanol’s Discount to Gasoline Widens Third Day on Supply

Ethanol’s discount to gasoline widened for a third day on speculation easing corn costs will boost output.

The spread, or price difference, expanded 4.26 cents to 64.94 cents a gallon as the corn crush spread, or the cost difference between a gallon of ethanol and the corn needed to make it, was 35 cents today, based on September contracts for the grain and biofuel, compared with minus 35 cents on Dec. 31, data compiled by Bloomberg show.

“It’s following in pattern with corn and the crush,” said Justin Dirico, manager of the biofuels desk at Eagle Energy Brokers LLC in New York. “Everything seems to have softened.”

Denatured ethanol for August delivery fell 2.9 cents, or 1.2 percent, to $2.474 a gallon on the Chicago Board of Trade. Prices have gained 13 percent this year.

Gasoline for August delivery increased 1.36 cents, or 0.4 percent, to $3.1234 a gallon on the New York Mercantile Exchange. The contract covers reformulated gasoline, made to be blended with ethanol before delivery to filling stations.

Tracking certificates, known as Renewable Identification Numbers, or RINs, are used by refiners and the U.S. Environmental Protection Agency, to show compliance with government mandates to use ethanol.

Ethanol Certificates

Corn-based ethanol RINs fell 5 cents to $1.36 at 10:27 a.m. New York time, data compiled by Bloomberg show. Advanced RINs, which cover biodiesel and Brazilian sugarcane-based ethanol, were unchanged at $1.42.

Both varieties of the RINs reached records on July 17 and the price increase was the subject of congressional hearings this week.

Corn for September delivery rose 3 cents, or 0.6 percent, to $5.44 a bushel in Chicago. One bushel makes at least 2.75 gallons of the renewable fuel. The more actively-traded December contract was unchanged at $5.0075.

Ethanol production last week slipped 0.6 percent to 876,000 barrels a day from the previous week, the U.S. Energy Information Administration said in a July 17 report.

Stockpiles of the biofuel jumped 5.5 percent to 16.6 million barrels, the biggest gain since Nov. 16 and the highest level since May 3, data from the Energy Department’s analytical arm show.

Supplies increased as imports of the biofuel doubled to 50,000 barrels a day, the most since June 14, EIA data show.

Spot Prices

In cash market trading, ethanol was unchanged in New York at $2.61 a gallon, data compiled by Bloomberg show. In Chicago, the additive slumped 9 cents to $2.51; in the U.S. Gulf, prices sank 9 cents to $2.585; and on the West Coast ethanol increased 1 cent to $2.695 a gallon.

Chicago’s discount to New York Harbor swelled 9 cents to 10 cents while the West Coast’s premium to the Gulf Coast jumped 10 cents to 11 cents, the widest in a week.

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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