Ethanol futures rose to the highest price in seven months as producers tempered output in the face of more expensive corn.
Prices increased as corn, the primary ingredient used to make the fuel, jumped to a nine-month high as the corn-rich Midwest bakes under a heat wave. An Energy Department report today showed ethanol production last week sank to the lowest level since Sept. 23.
“It’s up pretty good,” said Jim Damask, a manager at Biofuelsconnect, a Jupiter, Florida-based alternative energy broker. “You’ve got bad weather for corn, so ethanol’s up on that. We’ve seen producers trimming production because of margins.”
Denatured ethanol for July delivery advanced 4.4 cents, or 1.9 percent, to $2.398 a gallon on the Chicago Board of Trade, the highest price since Dec. 5. Futures have gained 8.9 percent this year.
In cash market trading, ethanol was unchanged in the U.S. Gulf at $2.38 a gallon and in Chicago the additive soared 7.5 cents, or 3.2 percent, to $2.39, according to data compiled by Bloomberg.
Ethanol on the West Coast added 6 cents, or 2.5 percent, to $2.50 a gallon and in New York the biofuel surged 5.5 cents, or 2.3 percent, to $2.46.
Corn for December delivery surged 36.75 cents, or 5.5 percent, to $7.1125 a bushel in Chicago. One bushel makes at least 2.75 gallons of ethanol.
Production of ethanol slipped 2.9 percent to 857,000 barrels a day last week. That’s both the biggest drop and lowest amount since Sept. 23.