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Ethanol Poised for Longest Losing Streak Since July

Jan. 27 (Bloomberg) -- Ethanol futures fell for a sixth day in Chicago, the longest streak of losses since July, on speculation that stockpiles will increase while demand wanes as drivers stay home because of icy winter weather.

Futures sank 1 percent as Chicago temperatures dropped below zero. Ethanol stocks rose to a six-month high of 17 million barrels in the week ended Jan. 17, the Energy Information Administration reported Jan. 23.

“You just can’t be bullish ethanol in January,” said Jerrod Kitt, an analyst at Linn Group in Chicago. “Demand is off. You just don’t have enough consumption to move the needle. We’ve built up inventories.”

Denatured ethanol for February delivery slumped 1.7 cents to settle at $1.757 a gallon on the Chicago Board of Trade. Futures have fallen 26 percent in the past year.

Gasoline for February delivery slid 4.15 cents, or 1.6 percent, to $2.6217 a gallon on the New York Mercantile Exchange. The futures cover reformulated gasoline, made to be blended with ethanol before delivery to filling stations.

Ethanol’s discount to gasoline narrowed 2.45 cents to 86.47 cents a gallon.

Kitt said frigid temperatures have caused shipping delays at ethanol plants, creating a backlog of inventories.

Ethanol production in the U.S. rose 4.3 percent to 905,000 barrels a day in the week ended Jan. 17, data from the EIA, the Energy Department’s statistical arm, show.

Corn Futures

Corn for March delivery rose 2.25 cents, or 0.5 percent, to $4.3175 a bushel in Chicago. One bushel makes at least 2.75 gallons of ethanol. The corn crush spread, or the price difference between a bushel of the grain and a gallon of ethanol, was 15 cents, down from 17 cents Jan. 24.

In cash market trading, ethanol declined 4 cents to $2.055 a gallon in New York, 2 cents to $1.795 in Chicago, 2 cents to $1.985 on the Gulf Coast and 2 cents to $2.175 on the West Coast, data compiled by Bloomberg show.

The West Coast’s premium to the Gulf was unchanged at 19 cents, while Chicago’s discount to New York Harbor narrowed 2 cents to 26 cents.

The U.S. tracks compliance with ethanol consumption mandates with Renewable Identification Numbers, certificates attached to each gallon of biofuel that are submitted to the government and also traded among refiners.

Corn-based ethanol RINs for 2014 held at 33 cents and RINs for 2013 decreased 0.5 cent to 33.5 cents, data compiled by Bloomberg show.

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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