Ethanol futures fell a second day in Chicago amid unease about Europe’s economic recovery and as U.S. production of the biofuel rebounded from a two-year low.
Prices sank after European Central Bank President Mario Draghi failed to reassure investors he was ready to take immediately measures to support the region’s economy. Separately, an Energy Department report showed ethanol output rose for the first time in seven weeks and stockpiles jumped the most since June 15. Oil futures dropped 2 percent.
“It’s primarily due to the inaction by the European Central Bank,” said Dan Flynn, a trader at Price Futures Group in Chicago. “Crude oil is down pretty hard and that weakness just carried over to the ethanol market.”
Denatured ethanol for August delivery fell 3.1 cents, or 1.2 percent, to $2.565 a gallon on the Chicago Board of Trade. Prices gained 18 percent in July, the most since June 2008.
In cash market trading, ethanol in New York sank 4 cents to $2.615 a gallon, according to data compiled by Bloomberg. In Chicago, the additive dropped 3 cents to $2.53.
Ethanol in the U.S. Gulf slid 3 cents, or 1.2 percent, to $2.59 a gallon and on the West Coast the additive decreased 2 cents to $2.735.
Producers of the fuel had slashed output a record six consecutive weeks because of negative margins to make the fuel in the face of record corn prices from drought in the Midwest.
Corn for December delivery tumbled 0.6 percent to settle at $7.9575 a bushel on the Chicago Board of Trade.
A bipartisan group of 150 members of Congress today sent a letter to U.S. Environmental Protection Agency Administrator Lisa P. Jackson, asking her to reduce the nation’s Renewable Fuel Standard, which mandates ethanol use, because of the higher corn price and drought.
Flynn said the market hasn’t reacted to whether the law for refiners to use 13.2 billion gallons of the fuel this year and 13.6 billion next year would be waived.
In 2008, Texas Governor Rick Perry submitted a waiver request to the EPA on the mandate that was rejected. That year Arizona Senator John McCain, then the Republican candidate for president, and other lawmakers asked the agency to adjust the requirement because of higher corn prices.
“It’s all talk at this point,” Flynn said. “Traders are looking at it like, ‘OK, we’ve seen this all before.’”
Ethanol interests, such as the Washington-based Renewable Fuels Association, contend that ample stockpiles coupled with excess credits refiners can submit to the EPA to meet the requirements are adequate and that no changes are needed to the program.