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Ethanol Falls as Production Jumps to Highest Level in 16 Months

Ethanol fell for a second day after the government said production reached a 16-month high and the corn harvest advanced.

Futures slipped after the U.S. Energy Information Administration said output rose 3.2 percent to 897,000 barrels a day last week, the most since June 15, 2012. An Oct. 21 Agriculture Department report estimated that farmers have harvested 39 percent of their corn, the primary ingredient used to make ethanol in the U.S. The USDA predicts a record harvest for corn.

“This should relieve some supply anxiety,” said Jerrod Kitt, an analyst at Linn Group in Chicago. “The corn harvest is in full bore.”

Denatured ethanol for November delivery sank 1.6 cents, or 0.9 percent, to $1.801 a gallon on the Chicago Board of Trade. Futures are down 18 percent this year.

Gasoline for November delivery sank 6.44 cents, or 2.5 percent, to $2.5523 a gallon on the New York Mercantile Exchange. The contract covers reformulated gasoline, made to be blended with ethanol before delivery to filling stations.

Ethanol’s discount to the motor fuel narrowed 4.84 cents to 75.13 cents a gallon.

Corn for December delivery advanced 4.5 cents, or 1 percent, to $4.4275 a bushel in Chicago. Kitt said the higher corn price kept ethanol from falling as much as gasoline.

“It’s one of those tail-wagging-the-dog scenarios,” Kitt said. The December corn crush spread of corn to ethanol was 5 cents, down from 9 cents yesterday.

Below Average

Even with the gain in production, ethanol stockpiles were below average for this time of year. Inventories expanded 0.5 percent to 15.5 million barrels, data from the Energy Department’s statistical arm showed. The U.S. hasn’t made foreign purchases for the past three weeks.

In cash market trading, ethanol decreased 3 cents to $2.22 a gallon on the West Coast, 2.5 cents to $2.115 on the Gulf Coast, 2.5 cents to $2.045 in Chicago and 3 cents to $2.15 in New York, data compiled by Bloomberg show.

The EPA tracks compliance with the federal ethanol-use mandate with Renewable Identification Numbers, or RINs, tradable certificates that are attached to each gallon of biofuel.

Corn-based RINs fell 3 cents to 25 cents, while advanced RINs, which cover biodiesel and Brazilian sugarcane-based ethanol, decreased 3 cents to 38 cents.

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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