Ethanol Weakens Versus Gasoline for Fourth Day as Producers Sell

Ethanol weakened for a fourth day against gasoline as producers sold the fuel to take advantage of prices near the highest level in seven weeks.

The ethanol-gasoline spread expanded by 1.85 cents, extending the biofuel’s longest streak of losses versus the motor fuel in five weeks. The additive is on track to the first monthly gain since October and has risen 8.5 percent to start the year.

“We’ve had a good run-up here,” said Jerrod Kitt, an analyst at Linn Group in Chicago. “It makes some sense to go out here and sell and lock in margins.”

The grain-based additive was 49.94 cents cheaper than gasoline, based on prompt-month contracts for both commodities, the widest since Jan. 10. The spread was 48.09 cents yesterday.

Denatured ethanol for February delivery slid 0.6 cent, or 0.3 percent, to $2.376 a gallon on the Chicago Board of Trade.

Gasoline for February delivery rose 1.25 cents, or 0.4 percent, to $2.8754 a gallon on the New York Mercantile Exchange. The contract covers reformulated gasoline, which is made to be blended with ethanol before delivery to filling stations.

Corn for March delivery fell 3.5 cents, or 0.5 percent, to $7.2075 a bushel in Chicago. One bushel makes at least 2.75 gallons of ethanol.

Based on March contracts for corn and ethanol, producers are losing 23 cents on each gallon of the fuel made, unchanged from yesterday, according to data compiled by Bloomberg. The figures exclude the revenue that can be made from the sale of dried distillers’ grains, a byproduct of ethanol production that can be fed to livestock.

In cash market trading, ethanol on the West Coast was unchanged at $2.57 a gallon and in the U.S. Gulf the additive slid 1 cent to $2.42, data compiled by Bloomberg show.

Ethanol in New York fell 1 cent to $2.47 a gallon and in Chicago the biofuel declined 1.5 cents to $2.37.

Before it's here, it's on the Bloomberg Terminal.