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Ethanol Jumps After U.S. Corn Production Outlook Misses Estimate

Ethanol futures jumped the most in six weeks after outlooks for U.S. corn production and inventories missed analysts’ estimates.

Ethanol rose 2.4 percent, the biggest gain since Oct. 3, after the Agriculture Department said corn output will be a record 13.989 billion bushels this year while stockpiles are projected to be 1.887 billion bushels on Aug. 31, 2014. That compared with an average production estimate of 14.029 billion and inventories of 2.044 billion bushels predicted in a Bloomberg survey.

“Both corn output and inventories were a big surprise,” Renato Dias, a Campinas, Brazil-based analyst for Intl FCStone Inc., said in a telephone interview. “Distillers would expect to see more corn around.”

Ethanol’s discount to gasoline widened 1.13 cents to 87.94 cents a gallon.

Denatured ethanol for December delivery advanced 3.9 cents to settle at $1.674 a gallon on the Chicago Board of Trade.

Gasoline for December delivery climbed 5.03 cents, or 2 percent, to $2.5534 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 Demand

U.S. distillers will use 4.9 billion bushels of corn, or 35 percent of the crop, to make ethanol, unchanged from a Sept. 11 estimate, the Agriculture Department said. U.S. biodiesel makers will use 5.6 billion pounds of soybean oil, down from 5.7 billion previously estimated.

Corn for December delivery reversed earlier losses to rise 6.25 cents, or 1.5 percent, to $4.2675 a bushel in Chicago. Corn is the main feedstock used to make ethanol in the U.S.

“There won’t be as much corn as people expected in the U.S., but there’s plenty of it in places like Brazil and Argentina,” Dias said. “I would’t be surprised if prices bounce back in the short term.”

The December crush spread of corn to ethanol was 12 cents, up from 11 cents yesterday, data compiled by Bloomberg show.

Corn-based-ethanol RINs declined 1 cent to 25 cents, while advanced RINs, which cover biodiesel and Brazilian sugarcane-based ethanol, dropped 2 cents to 32 cents, according to data collected by Bloomberg.

In cash market trading, ethanol gained 9.5 cents to $2.025 a gallon in New York, 6.5 cents to $1.76 in Chicago and 6.5 cents to $1.86 a gallon on the Gulf Coast, data compiled by Bloomberg show. Prices dropped 5 cents to $1.90 on the West Coast.

The West Coast’s premium to the Gulf narrowed 11.5 cents to 4 cents, while Chicago’s discount to New York Harbor expanded 3 cents to 26.5 cents.

To contact the reporter on this story: Lucia Kassai in Houston at lkassai@bloomberg.net

To contact the editor responsible for this story: Dan Stets at dstets@bloomberg.net

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