Ethanol futures fell for the first time in three days after the U.S. Department of Agriculture trimmed its demand estimate on speculation record corn prices will curb consumption of the grain.
Futures followed corn lower after the USDA forecast corn demand will shrink 10 percent from a year earlier as a drought spurs prices. The agency estimated ethanol plants will consume 4.5 billion bushels of corn, down from 5 billion in a previous report. One bushel of the grain makes at least 2.75 gallons of ethanol.
“Ethanol was thin today with many participants sitting on the sidelines waiting to see how corn would react,” Ian Jackson and Ronnie Virissimo, traders at SCB & Associates in Chicago, wrote in an e-mail.
Denatured ethanol for September delivery fell 1.7 cents, or 0.6 percent, to $2.609 a gallon on the Chicago Board of Trade. Prices have gained 18 percent this year.
Analysts and traders braced for the USDA to make steeper cuts to its forecast after the worst drought in 56 years blanketed the corn-rich Midwest, according to Jerrod Kitt, an analyst at Linn Group in Chicago.
“There’s was nothing too bearish,” Kitt said. “Just that you didn’t get the absolute worst-case scenario.”
In cash market trading, ethanol was unchanged in New York at $2.65 a gallon, in Chicago at $2.59, in the U.S. Gulf at $2.64 and on the West Coast at $2.785, according to data compiled by Bloomberg.
Corn for December delivery sank 14.5 cents, or 1.8 percent, to $8.0925 a bushel in Chicago.