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Ethanol Surges as Corn Advances on Export Demand for U.S. Crop

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Feb. 17 (Bloomberg) -- Ethanol futures rose for the first time in five sessions as corn gained on signs that global demand is increasing for the U.S. crop.

The grain-based gasoline additive climbed after the Agriculture Department reported corn export sales in the week ended Feb. 10 were 15 percent above the average of the previous four weeks. Corn rose to a 31-month high.

“The bottom line is that I can take corn at this price level and I can feed corn to livestock and I can feed corn to ethanol and it still works,” said Jason Ward, an analyst at Northstar Commodity Investments in Minneapolis. “There is no sign of rationing of demand.”

Denatured ethanol for March delivery gained 6.5 cents, or 2.7 percent, to $2.505 a gallon on the Chicago Board of Trade. Prices have gained 47 percent in the past year.

In cash market trading, ethanol in the U.S. Gulf was unchanged at $2.505 a gallon and in Chicago the additive jumped 2.5 cents, or 1 percent, to $2.455, according to data compiled by Bloomberg.

Ethanol in New York added 1.5 cents, or 0.6 percent, to $2.56 a gallon and on the West Coast the biofuel increased 1.5 cents to $2.565.

Corn futures for May delivery rose 22 cents, or 3.1 percent, to $7.23 a bushel on the Chicago Board of Trade. The price touched $7.245, the highest level for the most-active contract since July 2008.

“The big difference between 2008 and this year is that I can afford this price,” Ward said. “The pain threshold for the end-user is higher today than it was in 2008.”

An average ethanol mill in Iowa is losing 8 cents on every gallon produced while an Illinois plant is losing 2 cents a gallon on a spot basis, according to Ag Trader Talk, an online grains information service in Clive, Iowa.

To contact the reporter on this story: Leela Landress in Houston at llandress@bloomberg.net

To contact the editor responsible for this story: Dan Stets at dstets@bloomberg.net.

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