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Ethanol Climbs to Two-Week High Amid Forecasts of Drier Weather

Oct. 16 (Bloomberg) -- Ethanol futures climbed to a two-week high amid signals of buying from refiners and as drier weather later this week was expected to boost supplies of corn.

Denatured ethanol for November delivery rose 2.4 cents, or 1.4 percent, to settle at $1.808 a gallon on the Chicago Board of Trade, paring this year’s losses to 17 percent. It was the highest price since Oct. 3. The U.S. harvest is expected to pick up later this week as fields dry, MDA Weather Services said yesterday.

“It’s all about corn, cheap corn available,” Jim Damask, a manager at Starfuels Inc. in Jupiter, Florida, said in a telephone interview. “Also, there are signals of refiners buying ethanol amid low inventories.”

Ethanol’s discount against gasoline widened 1.83 cents to 89.41 cents a gallon, after narrowing for three days, as gasoline soared to the highest level since Sept. 26.

November-delivery gasoline advanced 4.23 cents, or 1.6 percent, to $2.7021 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 output margins were “very healthy” after corn prices weakened, Aakash Doshi, a Citigroup Inc. analyst in New York, said in a report today. Corn is the primary component in U.S.-made ethanol.

Corn Prices

Corn for December settlement declined 0.2 percent to $4.4275 a bushel in Chicago. Prices have slumped 37 percent this year, the worst performance amid 44 commodities tracked by Bloomberg, as the U.S. is harvesting a record crop estimated at 13.8 billion bushels.

Corn-based Renewable Identification Numbers for 2013 slipped 1 cent to 33 cents a gallon, while advanced RINs, which cover biodiesel and Brazilian sugar-cane based ethanol, fell 2 cents to 47 cents a gallon, data compiled by Bloomberg showed.

The U.S. Environmental Protection Agency tracks compliance with federal blending mandates with RINS, certificates attached to each gallon of biofuel that are submitted to the government and can be traded among companies.

In cash market trading, ethanol gained 5 cents to $2.325 a gallon on the West Coast and 1.5 cents to $2.33 in New York, according to data compiled by Bloomberg. The biofuel fell 2 cents in Chicago and in the Gulf Coast, to $2.08 and $2.175 a gallon, respectively.

New York’s premium to Chicago expanded 3.5 cents to 25 cents a gallon, while the West Coast’s premium to the Gulf widened 7 cents to 15 cents.

To contact the reporter on this story: Lucia Kassai in Houston at lkassai@bloomberg.net

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

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