Ethanol futures declined in Chicago on concern the tax credits that help support the industry won’t be extended by Congress.
The grain-based additive dropped two days after a bill that would slash the tax credit by 20 percent, keep the 54-cent tariff on Brazilian imports in place and extend the provisions for one year was rejected by the U.S. Senate.
“Corn is one issue, but they’re also looking over their shoulders at the ethanol tariff and tax credit,” said Rich Nelson, director of research at Allendale Inc. in McHenry, Illinois. “We got some disappointing news over the weekend. At this end the ethanol market feels a little weak.”
Denatured ethanol for January delivery fell 3.1 cents, or 1.5 percent, to settle at $2.07 a gallon on the Chicago Board of Trade.
In cash market trading, ethanol in the U.S. Gulf fell 2.5 cents, or 1.1 percent, to $2.175 a gallon and in New York and on the West Coast the fuel declined 1.5 cents, or 0.7 percent, to $2.165, according to data compiled by Bloomberg.
Ethanol in Chicago slipped 1.5 cents, or 0.7 percent, to $2.055 a gallon.
Government incentives for the fuel were to be slashed by 20 percent to 36 cents a gallon and extended for one year, along with the Brazilian tariff, under a bill that was introduced by Senator Max Baucus, a Democrat from Montana and chairman of the Finance Committee. It was rejected by the Senate on Dec. 4.
An Energy Department report Dec. 1 showed that production of conventional gasoline blended with ethanol tumbled 6.8 percent to 4.52 million barrels a day last week, the lowest level since April 30.
Corn for March delivery slid 5.5 cents, or 1 percent, to $5.68 a bushel in Chicago. One bushel of the grain distills into about 2.75 gallons of ethanol.
An average ethanol mill in Iowa is losing 2 cents on every gallon produced while an Illinois plant is earning 4 cents a gallon on a spot basis, according to Ag Trader Talk, an online grains information service in Clive, Iowa.