Ethanol’s discount to gasoline expanded to the most in almost three months on a supply glut of the fuel exacerbated by foreign imports.
The biofuel’s price has dropped 8.5 percent this month, headed for the worst monthly performance since May, as inventories in the week ended Dec. 14 were 20.8 million barrels, up 18 percent from a year earlier. Imports have averaged 28,000 barrels a day this year, up from 6,000 in 2011.
“There are supplies in the front because of Brazilian imports,” said Jordan Stern, a trader at SCB & Associates in Chicago. “There’s just a lot of supply.”
Ethanol’s discount to gasoline expanded to 61.83 cents a gallon based on January contracts, the widest since Sept. 28, from 60.98 cents yesterday. It was 18.79 cents Dec. 6. The differential has averaged about 61 cents this year.
Denatured ethanol for January delivery fell 0.3 cent to settle at $2.203 a gallon on the Chicago Board of Trade. Futures are unchanged this year.
In cash market trading, ethanol in New York fell 3 cents, or 1.3 percent, to $2.285 a gallon and in the U.S. Gulf the additive decreased 2.5 cents, or 1.1 percent, to $2.215, data compiled by Bloomberg shows. Ethanol in Chicago was unchanged at $2.185 a gallon and on the West Coast the biofuel added 1.5 cents, or 0.6 percent, to $2.35.
U.S. producers have faced increased competition from Brazilian manufacturers that use sugarcane instead of corn, Stern said.
Gasoline for January delivery rose 0.55 cent to $2.8213 a gallon on the New York Mercantile Exchange. The contract covers reformulated gasoline, made to be blended with ethanol before delivery to filling stations.
The Energy Department is scheduled to report last week’s petroleum and ethanol inventories at 11 a.m. tomorrow, two days later than usual because of the Christmas holiday.
Corn for March delivery decreased 1.75 cents, or 0.3 percent, to $6.915 a bushel in Chicago. One bushel makes at least 2.75 gallons of ethanol.
Based on March contracts for corn and ethanol, producers are losing 28 cents on each gallon of the fuel made, down from 29 cents 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.