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Ethanol’s Discount to Gasoline at Widest in a Week on Output

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April 24 (Bloomberg) -- Ethanol’s discount to gasoline reached the widest level in more than a week as improving returns to make the fuel entice companies to resume output.

The spread, or price difference, expanded 2.34 cents to 31.24 cents a gallon, the steepest since April 16. Poet LLC and Abengoa SA said yesterday they resumed output at distilleries that were closed after last year’s drought in the Midwest boosted corn prices to a record and increased manufacturing costs. Renewable Identification Numbers plunged.

“When prices got a little high, a lot more product became available,” said Jim Damask, a manager at Starfuels Inc. in Jupiter, Florida. “There was some margin that they saw and they turned the plants back on.”

Denatured ethanol for May delivery added 0.5 cent to $2.435 a gallon on the Chicago Board of Trade. Prices have gained 11 percent this year.

Gasoline for May delivery advanced 2.84 cents, or 1 percent, to $2.7474 a gallon on the New York Mercantile Exchange. The contract covers reformulated gasoline, made to be blended with ethanol before delivery to filling stations.

Ethanol production rose 2.5 percent to 853,000 barrels a day in the week ended April 19, the most since April 5, a report from the Energy Information Administration showed today.

Stockpiles increased 0.5 percent to 17.6 million barrels, the Energy Department’s analytical arm said. That’s down 19 percent from a year earlier.

Corn Declining

Corn has dropped 14 percent from the 2013 high of $7.4125 a bushel on rising inventory estimates and projections that farmers would boost planting to the most since 1936. Futures for May delivery rose 1 cent to $6.395 a bushel today in Chicago. One bushel makes at least 2.75 gallons of ethanol.

The corn crush spread was 11 cents a gallon, unchanged from yesterday. That compares to minus 35 cents on Dec. 31. The amount doesn’t include revenue from the sale of dried distillers’ grains, a byproduct of ethanol production, which can be fed to livestock.

Ethanol-blended gasoline made up about 93 percent of the total U.S. gasoline pool, the lowest level since March 29 and down from 94 percent the previous week, the EIA report showed today.

The U.S. made foreign purchases of the fuel for the first time in three weeks. Imports were 39,000 barrels a day in the week ended April 19, up from 11,000 a year earlier.

Spot ethanol in Sao Paulo fetched $2.46 a gallon last week, according to data compiled by Bloomberg.

RINs Decline

Corn-based RINs fell 6.9 percent to 61 cents, the lowest level since March 25, data compiled by Bloomberg show. Advanced RINs, which cover biodiesel and Brazilian sugarcane-based ethanol, decreased 0.7 percent to 76 cents.

RINs are certificates assigned to each gallon of biofuel to track compliance with government mandates. Once the fuel is mixed with petroleum, refiners can maintain the certificate or trade it.

Corn-based RINs have plunged 42 percent from a record $1.06 on March 8. Advanced RINs have dropped 30 percent from their high of $1.08 the same day.

In cash market trading, ethanol decreased 4.5 cents to $2.615 a gallon in New York, 3.5 cents to $2.44 in Chicago, 4.5 cents to $2.50 on the Gulf Coast and 3.5 cents to $2.68 on the West Coast, data compiled by Bloomberg show.

New York Harbor’s premium to Chicago contracted 1 cent to 17.5 cents. The Gulf Coast’s discount to the West Coast expanded 1 cent to 18 cents.

To contact the reporter on this story: Mario Parker in Chicago at mparker22@bloomberg.net

To contact the editor responsible for this story: Dan Stets at dstets@bloomberg.net

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