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Ethanol Drops a Second Day as Corn Declines, Crude Oil Advances

Dec. 5 (Bloomberg) -- Ethanol futures eased for a second day in Chicago as corn declined and crude oil rose.

Futures slipped 0.1 percent as corn, the primary input for the biofuel in the U.S., fell on speculation an Agriculture Department report this week will show ample inventories of the grain. Oil gained as much as 1.5 percent before ending 3 cents higher amid tension in the Middle East that threatens supply and on speculation that European leaders will remedy the region’s debt crisis, boosting fuel demand.

“It really, really doesn’t” have any direction, said Dan Flynn, a trader at PFGBest in Chicago. “There’s record corn for ethanol. Stockpiles are good right now. We’re seeing higher prices on crude because of unrest in the Mideast and good news out of Europe.”

Denatured ethanol for December delivery fell 0.3 cent to $2.50 a gallon on the Chicago Board of Trade. The contract expired today. Prices have gained 5.1 percent this year. The more active January contract dropped 1.2 cents to $2.204.

In cash market trading ethanol in New York sank 10.5 cents, or 3.8 percent, to $2.69 a gallon and in Chicago the additive lost 10.5 cents, or 3.9 percent, to $2.575, according to data compiled by Bloomberg.

Ethanol in the U.S. Gulf dropped 10 cents, or 3.6 percent, to $2.705 a gallon and on the West Coast the biofuel slid 8 cents, or 2.9 percent, to $2.725.

Corn for March delivery tumbled 4.25 cents, or 0.7 percent, to $5.91 a bushel in Chicago. One bushel distills into about 2.75 gallons of the alternative fuel.

The Agriculture Department plans to release its forecast for U.S. and world corn inventories Dec. 9.

Crude for January delivery climbed 3 cents to $100.99 a barrel on the New York Mercantile Exchange, the highest settlement since Nov. 16. Prices are up 11 percent this year. Ethanol is part of U.S. energy plans to reduce dependence on the fossil fuel.

To contact the reporter on this story: Mario Parker in Chicago at mparker22@bloomberg.net

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

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