Ethanol futures rebounded from a two-week low in Chicago as gasoline climbed and corn gained amid concern over a smaller crop.
The grain-based biofuel rose 0.8 percent on speculation that farmers will forgo planting and take crop-insurance payments rather than risk a lower yield, signaling higher costs to produce ethanol. Gasoline, with which the additive is mixed, increased on Middle East tensions and a weaker dollar.
“It was outside markets,” said Michael Breitenbach, an analyst and trader at Blue Ocean Brokerage LLC in New York. “The planting issue continues to be a factor with corn. Ethanol is the nexus between the ‘ags’ and the energies. You’re seeing some uncertainty in both markets.”
Denatured ethanol for July delivery rose 2.2 cents to settle at $2.622 a gallon on the Chicago Board of Trade, the steepest one-day gain since May 25.
In cash market trading, ethanol in Chicago added 0.5 cent to $2.605 a gallon and in New York the gasoline additive slipped 1 cent, or 0.4 percent, to $2.69, according to data compiled by Bloomberg.
Ethanol was unchanged in the U.S. Gulf at $2.755 a gallon and on the West Coast at $2.77.
Corn futures for July delivery gained 4.5 cents, or 0.6 percent, to $7.365 a bushel in Chicago. One bushel makes at least 2.75 gallons of ethanol.
Gasoline for July delivery advanced 4.2 cents to settle at $2.9919 a gallon on the New York Mercantile Exchange. Prices touched $2.9947. The contract covers reformulated gasoline, which is made to be blended with ethanol before delivery to filling stations.
Average ethanol mills in Iowa are losing 9 cents on every gallon produced, while plants in Illinois are losing 5 cents on a spot basis, according to Ag Trader Talk, an online grains information service in Clive, Iowa.