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Ethanol’s Discount to Gasoline Steady on Seasonal High for Corn

Ethanol’s discount to gasoline was little changed on concern that producers will close plants as the price of corn, used to make the biofuel, traded at the highest seasonal level in half a century.

The grain-based additive was 60.07 cents cheaper than gasoline, based on February futures for both commodities. That compares with 60.11 cents yesterday.

“They’re still losing a lot of money,” said Jerrod Kitt, an analyst at Linn Group in Chicago.

Denatured ethanol for February delivery rose 0.3 cent to settle at $2.197 a gallon on the Chicago Board of Trade. January futures, which expire tomorrow, were unchanged at $2.179 a gallon. The front-month futures have fallen 2.7 percent in the past year.

Ethanol is made from corn in the U.S. Prices for the grain are the highest level for this time of year in records going back to 1961 after a drought scorched crops in the Midwest, according to data compiled by Bloomberg.

Corn for March delivery decreased 1.5 cents to $6.8925 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 29 cents on each gallon of the fuel made, down from 30 cents yesterday, according to data collected by Bloomberg. The figures exclude the revenue that can be made from the sale of dried distillers’ grains, a byproduct of ethanol production that can be fed to livestock.

Ethanol production averaged 834,000 barrels a day in the week ended Dec. 21, down 13 percent from the record 963,000 in the week ended Dec. 30, 2011, Energy Department data show.

Biofuel Supply

Stockpiles fell 2.5 percent to 20.3 million barrels from the previous week, the first decline since Nov. 23, the agency said in a Dec. 28 report.

The department is scheduled to report last week’s inventories at 11 a.m. tomorrow in Washington, two days later than usual because of the New Year’s holiday.

In cash market trading, ethanol in New York added 0.5 cent to $2.275 a gallon and in Chicago the biofuel increased 0.75 cent to $2.19, data compiled by Bloomberg shows.

Ethanol in the U.S. Gulf slipped 0.5 cent to $2.245 a gallon. On the West Coast the additive was unchanged at $2.35.

Gasoline for February delivery climbed 0.26 cent to $2.7977 a gallon on the New York Mercantile Exchange. The contract covers reformulated gasoline, which is made to be blended with ethanol before delivery to filling stations.

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