Ethanol futures rose to the highest level in almost four weeks in Chicago as a heat wave in the U.S. raised corn costs for producers.
Futures jumped 1.7 percent as the dry, warm weather reduced the yield potential for crops in the corn-rich U.S. Midwest. The U.S. Department of Agriculture reported yesterday that about 63 percent of the nation’s corn was in good or excellent condition as of June 17, down from 70 percent a year earlier. The grain is the primary ingredient used to make ethanol.
“That’s exactly why the ethanol is on fire,” said Dan Flynn, a trader at Futures Price Group in Chicago. “The corn is absolutely flying. This is a weather-driven market.”
Denatured ethanol for July delivery surged 3.5 cents to $2.112 a gallon on the Chicago Board of Trade, the highest settlement since May 23. It has fallen 4.1 percent this year.
In spot market trading, ethanol in Chicago soared 5.5 cents, or 2.7 percent, to $2.095 a gallon and in the U.S. Gulf the additive increased 3 cents, or 1.4 percent, to $2.155, according to data compiled by Bloomberg.
Ethanol on the West Coast added 3 cents to $2.18 a gallon and in New York the biofuel rose 2.5 cents to $2.14.
Corn for December delivery increased 29.5 cents, or 5.5 percent, to $5.635 a bushel in Chicago. The futures have risen 11 percent in the past two sessions.