Ethanol futures rose for a second day in Chicago on speculation farmers are withholding corn sales in an effort to increase price.
Futures followed corn higher on bets that farmers are holding onto supply as prices for the grain are 10 percent lower than a year ago, based on the most active contract. One bushel of corn makes at least 2.75 gallons of ethanol and producers are losing 22.7 cents on every gallon, based on data compiled by Bloomberg.
“Ethanol basically at this point is in a really low-margin environment that’s tracking pretty heavily to its input side,” said Chris Wilson, an analyst at First Capitol Risk Management in Galena, Illinois.
Denatured ethanol for June delivery climbed 0.4 cent to settle at $2.204 a gallon on the Chicago Board of Trade. The price was 2.3 cents higher than yesterday’s May contract expiration. Ethanol has fallen 16 percent in the past year.
In cash market trading, ethanol in Chicago dropped 3 cents, or 1.4 percent, to $2.145 a gallon and in the U.S. Gulf the additive decreased 1.5 cents, or 0.7 percent, to $2.215, according to data compiled by Bloomberg.
Ethanol in New York slumped 1.5 cents, or 0.7 percent, to $2.225 a gallon and on the West Coast the biofuel slipped 1.5 cents, or 0.7 percent, to $2.29.
Corn for July delivery, the most active contract, advanced 5.75 cents, or 0.9 percent, to $6.2025 a bushel in Chicago.