The value of Renewable Identification Numbers for corn-based ethanol jumped on concern that biofuel production and gasoline consumption won’t be robust enough to meet U.S. targets.
Prices for RINs, the credits that help the government track whether refiners are meeting federal biofuel-use mandates, rose 38 percent to 47 cents today, according to Starfuels Inc., an ethanol broker in Jupiter, Florida.
The increase came as motor fuel demand shrank and after an Agriculture Department report estimated that corn used for ethanol next year will be below what’s needed to produce enough to meet government plans for 14.4 billion gallons of the fuel.
The federal government wants U.S. refiners to use escalating amounts of ethanol in gasoline, up to 15 billion gallons by 2015.
Falling motor fuel consumption, poor production returns and limits on how much is used in gasoline at filling stations is making it difficult to meet the targets, according to Mike Blackford, a consultant at INTL FCStone in Des Moines, Iowa.
“They’ve got an ugly situation,” Blackford said. “They won’t produce enough or use enough to get to the target. It’s up to the RINs to make up the difference.”
Denatured ethanol for March delivery fell 1.5 cents, or 0.6 percent, to $2.35 a gallon at 1:32 p.m. New York time on the Chicago Board of Trade. Prices have gained 7.6 percent in the past year.
Joseph Glauber, the Agriculture Department’s chief economist, said today that corn to be used for ethanol in the 2013-2014 growing season will be below 5 billion bushels for a second year. One bushel makes at least 2.75 gallons of renewable fuel.
At least 19 ethanol plants have idled output since June as the worst drought since the 1930s wilted corn crops and boosted production costs for the additive, according to the Renewable Fuels Association in Washington.
There were about 2.6 billion RINs in the market to start 2012, generated from years of overproduction and consumption beyond what was mandated, refiners probably cashed in 300 million to meet that year’s requirements, said Geoff Cooper, an economist at the RFA.
He estimates that refiners will use more this year to meet the requirements as production lags.