Ethanol Rises Most in Six Weeks on Weather Delaying Shipments

Ethanol rose the most in six weeks on concern that bad weather in the U.S. Midwest and Southeast will slow shipments of the biofuel.

Futures gained 3.4 percent. BNSF Railway Co., Union Pacific Corp., and Norfolk Southern Corp. are among railroads that have told customers to expect delays because of frigid, icy weather. Ethanol is typically shipped by rail, barge or truck.

“Definitely, the front-end is getting pushed up with the delays on rail,” said Chris Wilson, a broker at Atten Babler Risk Management LLC in Galena, Illinois. “Trucks are having a tough time, too. The logistics issues are supporting the front-end.”

Denatured ethanol for February delivery advanced 6.3 cents to settle at $1.891 a gallon on the Chicago Board of Trade, the biggest gain by percentage since Dec. 19. Prices have fallen 23 percent in the past year.

Gasoline for February delivery rose 0.17 cent to $2.6626 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 contracted by 6.13 cents to 77.16 cents a gallon.

Ethanol Exports

Wilson said ethanol prices below $2 a gallon attract interest from foreign customers.

“The export market starts to come back in,” Wilson said. “So you have the demand side that’s supportive as well.”

The U.S. exported about 1.96 million barrels of ethanol in November, the most since March 2012, the Energy Information Administration reported today.

China purchased a record amount and India bought the most since November 2011, according to the EIA, the Energy Department’s statistical arm.

Ethanol is made mostly from corn in the U.S., with one bushel making at least 2.75 gallons of the renewable fuel.

Corn for March delivery climbed 6 cents, or 1.4 percent, to $4.335 a bushel in Chicago. The corn crush spread, or the price difference between a bushel of corn and a gallon of ethanol, was 25 cents, up from 24 cents yesterday.

In cash market trading, ethanol jumped 11 cents to $2.10 a gallon on the Gulf Coast, 11 cents to $1.92 in Chicago and 9.5 cents to $2.15 in New York, data compiled by Bloomberg show. On the West Coast, the biofuel dropped 0.5 cents to $2.17 a gallon.

The West Coast’s premium to the Gulf narrowed 11.5 cents to 7 cents, while Chicago’s discount to New York Harbor tightened 1.5 cents to 23 cents.

The U.S. tracks compliance with ethanol consumption mandates with Renewable Identification Numbers, certificates attached to each gallon of biofuel that are submitted to the government and also traded among refiners.

Corn-based ethanol RINs for 2014 and 2013 both jumped 2.25 cents to 36.75 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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