Ethanol’s Discount to Gasoline Tightens on Signs Imports Slowing

Dec. 4 (Bloomberg) -- Ethanol’s discount to gasoline tightened to the narrowest in three weeks on signs imports of the fuel are slowing, affecting supply of the biofuel.

The grain-based additive’s discount to gasoline was 26.5 cents a gallon based on front-month futures, versus 29.85 cents yesterday. The spread has averaged 62.52 cents this year.

Imports in the week ended Nov. 23 averaged 27,000 barrels a day, down 78 percent from the Oct. 12 level, which was the highest since the Energy Department began tracking weekly data for the biofuel in June 2010. The agency is scheduled to release its weekly report at 10:30 a.m. tomorrow in Washington.

“We’re getting optimistic that that torrent is slowing,” said Jerrod Kitt, an analyst at Linn Group in Chicago.

Denatured ethanol for December delivery fell 0.4 cent to $2.424 a gallon on the Chicago Board of Trade. The contract expires tomorrow. Futures have gained 10 percent this year. The more actively traded January contract fell 0.4 cent to $2.42.

In cash market trading, ethanol rose 0.5 cent to $2.53 a gallon in New York, fell 1 cent to $2.42 in Chicago, slipped 3 cents to $2.465 on the Gulf Coast and dropped 3 cents to $2.57 on the West Coast, data compiled by Bloomberg show.

Gasoline for January delivery decreased 3.75 cents, or 1.4 percent, to settle at $2.689. The contract covers reformulated gasoline, made to be blended with ethanol before delivery to filling stations.

Corn for March delivery dropped 2.75 cents, or 0.4 percent, to $7.52 a bushel in Chicago. One bushel makes at least 2.75 gallons of ethanol.

Based on December contracts for corn and ethanol, producers are losing 29 cents on each gallon of the fuel made, unchanged from yesterday, excluding the revenue that can be pocketed from the sale of dried distillers’ grains, a byproduct of ethanol production that can be fed to livestock, according to data collected by Bloomberg.

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