Ethanol Plummets Versus Gasoline as Output Jumps to 11-Week High

Ethanol plummeted against gasoline after a government report signaled distillers are receiving enough corn to allow them to boost output. Renewable Identification Numbers also plunged.

The spread, or price difference, expanded 6.21 cents to $1.0017 a gallon on Energy Information Administration data today showing production last week jumped 5.2 percent to 875,000 barrels a day, the most since July 12. About 12 percent of the corn crop was harvested as of Sept. 27, according to the Agriculture Department.

“It’s amazing what a little new-crop corn or corn availability can do,” said Garrett Toay, founder of Toay Commodity Futures Group LLC in Clive, Iowa. “You’re seeing what they’re able to do now that they’re getting corn. It’s just a matter of time before supply gets refilled.”

Denatured ethanol for November delivery tumbled 4.4 cents, or 2.6 percent, to $1.627 a gallon on the Chicago Board of Trade. The October contract, which expires tomorrow, fell 12.3 cents, or 6.4 percent, to $1.787.

Gasoline for November delivery rose 1.81 cents, or 0.7 percent, to $2.6287 a gallon on the New York Mercantile Exchange. The contract covers reformulated gasoline, made to be blended with ethanol before delivery to filling stations.

RINs Prices

A 2007 energy law requires the U.S. to use 13.8 billion gallons of ethanol this year. The government maintains compliance with Renewable Identification Numbers, or RINs, tracking certificates attached to each batch of biofuel. They can be traded among refiners and later submitted to the Environmental Protection Agency.

Conventional ethanol RINs dropped 6 cents to 39 cents, the lowest since Feb. 20, while advanced RINs, which cover biodiesel and Brazilian sugarcane-based ethanol, declined 4 cents to 49 cents, the cheapest since Jan. 30, according to data compiled by Bloomberg.

Ethanol is made mostly from corn in the U.S. and one bushel of the grain makes at least 2.75 gallons of the fuel.

Last month, the USDA predicted a record corn harvest of 13.843 billion bushels, 28 percent above last year. Harvest is typically September through November.

Corn for December delivery was unchanged at $4.39 a bushel in Chicago. The December corn crush spread of corn to ethanol was minus 2 cents, down from break-even yesterday.

Ethanol Output

Ethanol production in the week ended Sept. 27 jumped the most since April, according to the EIA, the Energy Department’s analytical arm.

Stockpiles declined 0.7 percent to 15.5 million barrels, the lowest since June 28, while imports tumbled 71 percent to 14,000 barrels a day, EIA said.

Ethanol blender and refinery inputs, a measure of demand, slipped 0.7 percent.

In cash market trading, ethanol tumbled 33.5 cents to $1.975 a gallon in Chicago, dropped 32 cents to $2.055 on the Gulf Coast, 21.5 cents to $2.05 on the West Coast and 7.5 cents to $2.20 a gallon in New York, data compiled by Bloomberg show.

New York’s premium to Chicago was 22.5 cents, compared with a 3.5-cent deficit yesterday, while the West Coast’s discount to the Gulf narrowed 10.5 cents to 0.5 cent.

Spot anhydrous ethanol in Sao Paulo cost $2.22 a gallon as of Sept. 27, the highest price since July 5, 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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