Ethanol futures rose to an eight-month high after the government reported production of the biofuel dropped to the lowest level in more than two years.
Futures gained for the fifth straight day after the Energy Department said output fell 2.3 percent to 802,000 barrels a day last week, the least since the agency began tracking weekly data in 2010 and the longest streak of declines since February 2011.
“There was another huge decline,” said Will Babler, a broker at Atten Babler Risk Management LLC in Galena, Illinois. “The market may see that it’s rolling over and there has to be a higher bid.”
Denatured ethanol for August delivery rose 3.6 cents, or 1.3 percent, to $2.725 a gallon on the Chicago Board of Trade, the highest settlement since Nov. 3. Prices have gained 24 percent this year.
Corn for December delivery advanced 13 cents, or 1.7 percent, to $7.8425 a bushel in Chicago, as the grain-rich Midwest is mired in a drought. One bushel makes at least 2.75 gallons of ethanol.
Distillers are losing 21 cents on each gallon of ethanol made based on the September contracts for the fuel and corn, according to data compiled by Bloomberg. Companies including Valero Energy Corp., Nedak Ethanol LLC, Green Plains Renewable Energy Inc. and Pacific Ethanol Inc. have shut down or stopped production.