Ethanol Falls as Ample Corn Supply Reduces Cost of Production

Ethanol plunged as corn prices that have fallen 40 percent in the past year reduced the cost of making the fuel.

The biofuel sank 1.6 percent on speculation farmers are releasing supply. Ethanol is made mostly from corn in the U.S., with one bushel producing at least 2.75 gallons. The corn crush spread, or the difference between the price of the grain and a gallon of ethanol, was 26 cents, compared with minus 30 cents a year ago, data compiled by Bloomberg show.

“The farmers are letting go of some corn,” said Mike Blackford, a consultant at INTL FCStone in Des Moines, Iowa. “That’s getting the processor to want to sell the ethanol. The margins are there so they’re going to get it sold.”

Denatured ethanol for February delivery slid 3.2 cents to settle at $1.918 a gallon on the Chicago Board of Trade. Futures have fallen 18 percent in the past year.

Gasoline for February delivery dropped 1.17 cents, or 0.4 percent, to $2.6224 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 gasoline widened 2.03 cents to 70.44 cents a gallon.

Corn for March delivery dropped 3 cents to $4.315 a bushel in Chicago. Farmers collected a record 13.925 billion bushels last year, the U.S. Agriculture Department said Jan. 10.

Spot Prices

In cash market trading, ethanol fell 7.5 cents to $2.535 a gallon on the West Coast, 3 cents to $2.265 on the Gulf Coast, 2.5 cents to $2.15 in Chicago and 2.5 cents to $2.35 a gallon in New York, data compiled by Bloomberg show.

West Coast’s premium to the Gulf narrowed 4.5 cents to 27 cents, while Chicago’s discount to New York Harbor was unchanged at 20 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 RINs for 2014 fell 0.5 cent to 29.5 cents and RINs for 2013 held at 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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