Ethanol futures fell in Chicago, a day after touching a 32-month high, as crude oil declined on speculation that demand may drop.
The grain-based additive slipped after surging 14 percent this year, while oil dropped following an Institute for Supply Management report that showed a smaller-than-forecast increase in its U.S. index of non-manufacturing businesses. Ethanol is part of U.S. plans to reduce dependence on foreign oil sources.
“Most guys probably got rid of that April contract when they locked in the margin,” said Jason Ward, an analyst at Northstar Commodity Investments Inc. in Minneapolis. “Ethanol had been able to keep pace because we had higher crude oil prices.”
Denatured ethanol for April delivery fell 0.9 cent, or 0.3 percent, to $2.706 a gallon on the Chicago Board of Trade. Prices have risen 79 percent in the past year. The contract expired today. The more actively traded May contract increased 1.9 cents, or 0.7 percent, to $2.719.
Corn for May delivery jumped 6.5 cents, or 0.9 percent, to $7.6675 a bushel in Chicago, the highest closing price on record for the contract closest to expiration. Prices for the grain, the main ingredient in U.S.-made ethanol, have more than doubled in the past year.
Ward said ethanol plant profits are hovering near break-even because of the higher corn prices and some plants may be forced to idle.
“Corn has gotten ridiculous to the upside,” Ward said. “It’s really trying to shut down the end user. Really trying to ration demand.”