Ethanol’s discount to gasoline widened on speculation the coming corn harvest will lower costs and allow distilleries to raise production of the biofuel.
The spread, or prices difference, widened 0.2 cent to 81.82 cents a gallon as rain in the Midwest may aid crops that the U.S. Agriculture Department this month predicted will reach a record. One bushel of corn makes at least 2.75 gallons of the renewable fuel.
“We are on the tail end of the corn crop,” said Mike Blackford, a consultant at Intl FCStone in Des Moines, Iowa. “We’re starting to move into the regular new-crop slot. It would still be early to get the harvest, but we’re getting close.”
Denatured ethanol for October delivery dropped 1.5 cents, or 0.8 percent, to $1.866 a gallon on the Chicago Board of Trade. Futures have declined 15 percent this year.
Gasoline for October delivery slipped 1.3 cents, or 0.5 percent, to $2.6842 a gallon on the New York Mercantile Exchange. The contract covers reformulated gasoline, made to be blended with ethanol before delivery to filling stations.
Blackford said ethanol buyers are only purchasing enough for their immediate needs on speculation that the corn crop will lower future prices.
Corn for December delivery fell 8.5 cents, or 1.8 percent, to $4.51 a bushel in Chicago. The December crush spread of corn to ethanol was 1 cent, up from minus 2 cents yesterday. All other crush spreads through 2015 were negative.
Ethanol blender and inputs, a measure of demand, climbed 1 percent last week, the Energy Information Administration said in a Sept. 18 report.
Production fell 1.2 percent to 838,000 barrels a day, the Energy Department’s analytical arm said, while stockpiles decreased 0.6 percent to 16.2 million barrels.
Imports dropped 80 percent to 3,000 barrels a day, the smallest since June 28, EIA said.
Anhydrous ethanol in Sao Paulo cost $2.14 a gallon in the week ended Sept. 13, the most since July 26, data compiled by Bloomberg show.
Refiner compliance with federal mandates to use the biofuel are tracked by Renewable Identification Numbers, or RINs, attached to each batch of ethanol. The certificates can be kept by refiners or traded.
Corn-based-ethanol RINS were unchanged at 55 cents, while advanced RINS, which cover biodiesel and Brazilian sugarcane-based ethanol, fell 1 cent to 63 cents.
In cash market trading, ethanol in the West Coast tumbled 12.5 cents to $2.275 a gallon and in the U.S. Gulf, prices sank 10 cents to $2.375, data compiled by Bloomberg show. The biofuel gained 10 cents to $3 a gallon in Chicago and 7.5 cents to $2.40 in New York.
Chicago’s premium to New York Harbor stretched 2.5 cents to a record 60 cents, while the West Coast’s discount to the Gulf widened 2.5 cents to 10 cents.