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Ethanol Rises to Three-Week High as Farmers May Withhold Corn

Ethanol rose to a three-week high in Chicago on speculation that farmers are withholding corn supplies to boost prices.

Futures for the biofuel gained 1.9 percent as farmers have harvested about 39 percent of this year’s corn crop, according to Agriculture Department estimates. Farmers responded to low yields from last year’s drought-plagued crop by planting record acreage, helping to cause a 37 percent price decline this year for corn, the main ingredient of U.S. ethanol.

“I’d expect the ethanol producer to have to fight pretty hard to get the corn, not because it’s not available, but because the farmer wants higher prices,” said Jason Ward, an analyst at Northstar Commodity Investments in Minneapolis. “He’s harvesting his corn, but he doesn’t like the price.”

Denatured ethanol for November delivery rose 3.5 cents to $1.861 a gallon on the Chicago Board of Trade, the highest price since Oct. 3. Ethanol has declined 15 percent this year.

Gasoline for November delivery fell 0.25 cent to $2.5871 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’s discount to the motor fuel narrowed 3.75 cents to 72.61 cents a gallon, the tightest since Oct. 1.

Corn Futures

Corn for December delivery slipped 0.25 cent to $4.40 a bushel on the Chicago exchange. The December corn crush spread of corn to ethanol was 10 cents, up from 7 cents yesterday.

Ward said ethanol companies have to pay higher prices for the corn or risk seeing the grain shipped via rail from regions where farmers don’t have spare storage capacity. Farmers will be more willing to sell as more corn is collected and bin space tightens, Ward said.

Ethanol output increased 3.2 percent to 897,000 barrels a day last week, the highest level since June 15, 2012, an Oct. 23 Energy Information Administration report showed.

Stockpiles expanded 0.5 percent to 15.5 million barrels, down 17 percent from a year earlier, according to the EIA, the Energy Department’s statistical arm.

No foreign purchases of the fuel have been made since Sept. 27, EIA said.

The Environmental Protection Agency tracks compliance with the federal ethanol-use mandate with Renewable Identification Numbers, or RINs, tradable certificates that are attached to each gallon of biofuel.

Corn RINs

Corn-based RINs fell 2 cents to 22.55 cents, while advanced RINs, which cover biodiesel and Brazilian sugarcane-based ethanol, decreased 7 cents to 33 cents, data compiled by Bloomberg show.

In cash market trading, ethanol in Chicago rose 4 cents to $2.06 a gallon; in the U.S. Gulf prices gained 4 cents to $2.14; in New York the additive lost 2.5 cents to $2.125 and on the West Coast the biofuel decreased 0.5 cent to $2.16 a gallon, data compiled by Bloomberg show.

Chicago’s discount to New York Harbor slimmed 6.5 cents to 6.5 cents, while the West Coast’s premium to the Gulf narrowed 4.5 cents to 2 cents.

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