Ethanol Gains as Report Shows Smaller-Than-Expected Corn Supply

Ethanol increased for a second day after a government report showed a smaller-than-expected supply of corn, the primary feedstock for the biofuel.

Futures rose 2 percent after the U.S. Agriculture Department said corn stockpiles were 10.426 billion bushels on Dec. 1, compared with analysts’ estimates of 10.764 billion. One bushel makes at least 2.75 gallons of ethanol.

“There’s a little bit less corn out there than thought,” said Matt Janney, a trader at Futures International LLC in Chicago.

Denatured ethanol for February delivery advanced 3.8 cents to settle at $1.963 a gallon on the Chicago Board of Trade. Futures have fallen 13 percent in the past year.

Gasoline for February delivery rose 2.65 cents, or 1 percent, to $2.6691 a gallon on the New York Mercantile Exchange. The futures cover reformulated gasoline, made to be blended with ethanol before delivery to filling stations.

Ethanol’s discount to the motor fuel narrowed 1.15 cents to 70.61 cents a gallon.

The USDA increased its forecast for how much corn will be devoted to ethanol by 1 percent to 5 billion bushels, indicating higher production of the biofuel, Janney said.

Corn for March delivery surged 20.75 cents, or 5 percent, to $4.3275 a bushel in Chicago. The corn crush spread, or the difference between the cost of the grain and the price of ethanol, was 30 cents, down from 33 cents yesterday, data compiled by Bloomberg show.

Ethanol Output

Ethanol output will average 913,000 barrels a day this year, the Energy Information Administration said Jan. 7 in its Short-Term Energy Outlook. That compares with a December estimate of 900,000 barrels.

In cash market trading, ethanol rose 9 cents a gallon to $2.69 on the West Coast, 7.5 cents to $2.35 on the Gulf Coast and 2.5 cents to $2.20 in Chicago, according to data compiled by Bloomberg. In New York, the biofuel slumped 3 cents to $2.38.

Chicago’s discount to New York narrowed 5.5 cents to 18 cents, while the West Coast’s premium to the Gulf stretched 1.5 cents to 34 cents.

The U.S. keeps compliance with ethanol consumption mandates with Renewable Identification Numbers, tracking certificates attached to each gallon of biofuel and that can be traded among refiners.

Corn-based ethanol RINs for 2014 were unchanged at 29.5 cents and 2013 RINs added 0.5 cent to 30 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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