Ethanol futures plunged to the lowest price in more than eight weeks in Chicago on concern that the sluggish global economy will stifle demand.
Prices dropped the most since Aug. 13 on speculation that the Federal Reserve this week will announce a third round of stimulus efforts, or quantitative easing, known as QE3, to boost the economy and as dry Midwest weather helps farmers get into fields to collect corn, ethanol’s primary ingredient in the U.S.
“This is kind of the quiet before the storm,” said Dan Flynn, a trader at Price Futures Group in Chicago. “You have harvest pressure number one, and traders are waiting to see whether the Fed announces QE3.”
Denatured ethanol for October delivery dropped 3.6 cents, or 1.4 percent, to $2.476 a gallon on the Chicago Board of Trade, the lowest price since July 11. Futures have gained 12 percent this year.
In cash market trading, ethanol on the West Coast rose 1 cent, or 0.4 percent, to $2.665 a gallon, data compiled by Bloomberg show. The biofuel was unchanged in New York at $2.605 a gallon, in Chicago at $2.53 and in the U.S. Gulf Coast at $2.595 a gallon.
Corn for December delivery decreased 16.25 cents, or 2 percent, to $7.8325 a bushel in Chicago. One bushel makes at least 2.75 gallons of ethanol.
Gasoline for October delivery rose 0.44 cent to $3.024 a gallon on the New York Mercantile Exchange, the highest prices since Aug. 31. The contract covers reformulated gasoline, which is made to be blended with ethanol before delivery to filling stations.
The rise in gasoline stretches its premium to ethanol to 54.8 cents, from 50.8 on Sept. 7, making the biofuel more attractive to blend as refiners stand to pocket the difference between the two fuels.