Ethanol’s Discount to Gasoline Expands on Outlook for Ample Corn

Ethanol declined against gasoline on speculation that this fall’s corn harvest will bring ample supply of the biofuel feedstock.

The spread, or price difference, expanded 1.77 cents to 96.87 cents a gallon. The U.S. harvest may be a record 13.64 billion bushels, according to a Bloomberg survey of analysts. That would be less than the agency’s August prediction and 27 percent more than a year earlier, when crops were hurt by drought. The U.S. Agriculture Department updates its output forecast Sept. 12. One bushel of the grain makes at least 2.75 gallons of ethanol.

“While yields are down a bit it’s still a huge crop,” said Justin Dirico, manager of the biofuels desk at Eagle Energy Brokers LLC in New York. “That’s why the bulls haven’t really come out. It’s wait-and-see.”

Denatured ethanol for October delivery was unchanged at $1.885 a gallon on the Chicago Board of Trade. Futures have dropped 14 percent this year.

Gasoline for October delivery gained 1.77 cents, or 0.6 percent, to $2.8537 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 December delivery climbed 7.25 cents, or 1.6 percent, to $4.6825 a bushel in Chicago. September corn added 2 cents to $4.915.

Refiners are required to use 13.8 billion gallons of ethanol this year. Each batch of ethanol is given a Renewable Identification Number, or RIN, to help the government track compliance. RINs can be traded among companies.

RINs Unchanged

Corn-based ethanol RINs were unchanged at 69 cents, data compiled by Bloomberg show. Advanced RINs, which cover biodiesel and Brazilian sugarcane-based ethanol, held at 74 cents.

Production of the biofuel last week slipped to 819,000 barrels a day last week, the lowest since March 29, data from the U.S. Energy Information Administration show.

Stockpiles of the additive slumped 0.2 percent to 16.2 million barrels, the lowest since July 5, according to EIA data.

“There are blenders that are looking for ethanol in odd locations but for the most part everyone has their quotas filled and the focus is on new crop,” Dirico said.

Chicago spot ethanol rose 4 cents to $2.915 a gallon, stretching its record premium to New York Harbor to 29 cents, data compiled by Bloomberg show.

Ethanol in New York dropped 4.5 cents to $2.625 a gallon; on the West Coast prices sank 7.5 cents to $2.705 and in the U.S. Gulf the biofuel added 1 cent to $2.775 a gallon, data compiled by Bloomberg show.

The West Coast’s discount to the Gulf swelled to 7 cents from a premium of 1.5 cents yesterday.

Imports last week jumped to 37,000 barrels a day, up from 4,000 the previous week, according to EIA.

Ethanol refinery inputs, a measure of demand, fell 0.7 percent to a three-week low, EIA said.

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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