Ethanol Falls on Speculation Prices to Entice Higher Production

Ethanol fell, widening its discount to gasoline, on speculation that higher prices in some regions will entice companies to increase production.

The spread, or the price difference, expanded 1.9 cents to 67.89 cents a gallon. Last month’s 15 percent jump in ethanol futures was the biggest since July 2012. Prices in the New York Harbor spot market were near a seven-year high.

“We’re definitely at a point where people want to take money off the table,” said Mike Blackford, a consultant at INTL FCStone in Des Moines, Iowa. “Most plants are running pretty well right now.”

Denatured ethanol for January delivery fell 1.1 cents, or 0.5 percent, to $2.004 a gallon on the Chicago Board of Trade. Prices have declined 8.5 percent this year.

Gasoline for January delivery added 0.8 cent, or 0.3 percent, to $2.6829 a gallon on the New York Mercantile Exchange. The contract covers reformulated gasoline, made to be blended with ethanol before delivery to filling stations.

In cash market trading, ethanol in New York was unchanged at $3.55 a gallon, data compiled by Bloomberg show. The additive lost 5.5 cents to $2.525 in Chicago, 10.5 cents to $2.575 on the Gulf Coast and 5 cents to $2.625 on the West Coast. Prices in New York Harbor reached $3.60 on Dec. 6, the highest level since July 7, 2006, as stockpiles in the region fell to a record low.

“Eventually that gets solved,” Blackford said. “It’s just a matter of who has a train and how fast can they get it there.”

Corn Declines

Corn for December delivery fell 1 cent to $4.275 a bushel in Chicago. The more actively-traded March contract decreased 2 cents to $4.36. One bushel makes at least 2.75 gallons of the renewable fuel.

The corn crush spread, or the difference between a gallon of ethanol and the corn needed to make it, was 15 cents, based on the March contracts, little changed from yesterday, data compiled by Bloomberg show.

Ethanol production has been above 900,000 barrels a day since Oct. 25, data from the Energy Information Administration show. Total stockpiles were at 15.1 million barrels in the week ended Nov. 29, 22 percent lower than a year earlier.

The Energy Department’s statistical arm is scheduled to release the latest supply and production data tomorrow at 10:30 a.m. in Washington.

The U.S. Environmental Protection Agency enforces the nation’s biofuel consumption mandate with tracking certificates called Renewable Identification Numbers. They are attached to each gallon of the fuel and can be traded among refiners.

Corn-based RINs fell 5.5 cents to 29.5 cents, while advanced RINs, which cover Brazilian sugarcane-based ethanol and biodiesel, were unchanged at 29 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

Bloomberg reserves the right to edit or remove comments but is under no obligation to do so, or to explain individual moderation decisions.

Please enable JavaScript to view the comments powered by Disqus.