Ethanol Futures Fall Amid Ample Production, Lower Consumption

Ethanol futures fell in Chicago on speculation that production and supply of the fuel are ample to meet demand for blending.

U.S. ethanol output was 885,000 barrels a day in the week ended Nov. 26 as inventories swelled to 17.1 million barrels, the highest level in two months, according to a Dec. 1 report from the Energy Department, the most recent data available. Production of conventional gasoline blended with ethanol tumbled 6.8 percent to 4.52 million barrels a day, the lowest level since April 30.

“It’s weak, especially the prompt stuff,” said Jim Damask, a manager at BiofuelsConnect, a Heathrow, Florida-based alternative energy broker. “There’s a lot of supply. Now everyone has all this ethanol they want to sell.”

Denatured ethanol for January delivery fell 0.8 cent, or 0.4 percent, to settle at $2.062 a gallon on the Chicago Board of Trade.

In cash market trading, ethanol was unchanged in New York at $2.165 a gallon and in the U.S. Gulf at $2.175, according to data compiled by Bloomberg.

Ethanol on the West Coast dropped 4 cents, or 1.9 percent, to $2.125 a gallon and in Chicago the additive gained 0.5 cent to $2.06.

Production on an annualized basis was 13.6 billion gallons a day, according to the Energy Department data. There are 42 gallons in a barrel of ethanol. That’s 1.6 billion gallons more than the 12 billion the U.S. is required to use under a 2007 energy law and 1 billion gallons more than the 12.6 billion required to be blended with gasoline next year.

“There’s plenty,” Damask said. “When prices go down they jump over themselves to sell it.”

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.

Before it's here, it's on the Bloomberg Terminal. LEARN MORE