Ethanol’s Discount to Gasoline Narrows as Harvest Approaches

Ethanol’s discount to gasoline narrowed for a fourth day as distillers waited for the corn harvest and gasoline declined with the possible shutdown of the U.S. government.

The spread, or price difference, narrowed 0.15 cent to 67.22 cents a gallon as the government estimated that stockpiles of corn, the primary component in U.S. ethanol, were down 17 percent from a year earlier as of Sept. 1. A Sept. 26 Energy Information Administration report showed inventories of the biofuel at the smallest in 12 weeks.

“We’ve got a firmer tone here,” said Mike Blackford, a consultant at INTL FCStone in Des Moines, Iowa. “The pipeline is still pretty tight. We’re a few weeks away from those tanks getting filled.”

Denatured ethanol for October delivery slipped 4 cents, or 2 percent, to $1.95 a gallon on the Chicago Board of Trade. Futures have slumped 11 percent this year. The November contract fell 2.7 cents, or 1.6 percent, to $1.696.

Gasoline for October delivery decreased 4.15 cents, or 1.6 percent, to $2.6347 a gallon on the New York Mercantile Exchange. The contract covers reformulated gasoline, made to be blended with ethanol before delivery to filling stations. Gasoline slipped with crude as the deadline neared for Congress to pass a stopgap spending bill.

Stockpiles in the U.S., the world’s biggest grower, totaled 824 million bushels, down from 989 million a year earlier and up from 661 million estimated earlier this month, the USDA said today in a report. Analysts in a Bloomberg News survey expected 694 million, on average.

Record Harvest

The USDA earlier this month predicted a record harvest of 13.843 billion bushels, 28 percent above last year and up from 13.763 billion forecast in August. The agency will update its projections for major crops on Oct. 11. One bushel of corn makes at least 2.75 gallons of ethanol.

Corn for December delivery fell 12.5 cents, or 2.8 percent, to $4.415 a bushel in Chicago. The December corn crush spread of corn to ethanol was 1 cent, up from minus 1 cent Sept. 27.

Renewable Identification Numbers slipped. The RINs are tracking certificates attached to each batch of biofuel that can be traded among refiners and later submitted to the Environmental Protection Agency.

Corn-based RINs slumped 3 cents to 42 cents, while advanced RINs, which cover biodiesel and Brazilian sugarcane-based ethanol, decreased 5 cents to 50 cents, data compiled by Bloomberg show.

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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