Ethanol Discount to Gasoline Shrinks to Four-Month Low on Supply

Ethanol’s discount to gasoline narrowed to a four-month low on speculation that the slowest pace of corn planting since 1986 will make it difficult to replenish supplies.

The price difference, or spread, shrank 3.75 cents to 21.9 cents a gallon. The Agriculture Department said in a report yesterday that 5 percent of the crop was planted as of April 28, compared with a five-year average of 31 percent. Ethanol stockpiles are at the lowest for this time of year in records dating to June 2010, according to data compiled by Bloomberg. Renewable Identification Numbers, or RINs, surged.

“With the strong corn market, and we don’t have a huge inventory of product anyway, it just freaks people out,” said Jim Damask, a manager at StarFuels Inc., a Jupiter, Florida-based brokerage.

Denatured ethanol for May delivery rose 1.1 cents, or 0.4 percent, to $2.582 a gallon on the Chicago Board of Trade, the highest price since March 27. Futures have gained 18 percent this year and advanced for a second straight month.

Gasoline for May delivery decreased 2.65 cents, or 0.9 percent, to $2.801 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 gasoline today was the narrowest since Dec. 6 and down from 78.76 cents as recently as Feb. 14.

Gasoline Pool

Ethanol-blended gasoline made up 93 percent of the total U.S. gasoline pool in the week ended April 19, the lowest level since March 29, according to the Energy information Administration, the statistical arm of the Energy Department. Ethanol is mixed with the motor fuel to stretch supply and meet federal mandates.

The tightening spread may discourage refiners from blending beyond government obligations, Damask said.

“There’s money, but not as much,” he said. “When you factor in delivery, storage, rail, that starts to whittle that down more than we think.”

Corn for May delivery fell 0.75 cent to $6.8325 a bushel in Chicago. One bushel makes at least 2.75 gallons of the renewable fuel.

The corn crush spread was 10 cents a gallon, up from 8 cents April 26. That compares with minus 35 cents on Dec. 31. The amount doesn’t include revenue from the sale of dried distillers’ grains, a byproduct of ethanol production, which can be fed to livestock.

RINs Prices

Corn-based ethanol RINs rose 4.1 percent to 76.5 cents, a fourth consecutive gain and the highest price since April 10, data compiled by Bloomberg show.

Advanced RINs, which cover biodiesel and Brazilian sugarcane-based ethanol, added 3.9 percent to 81 cents, the most since April 22.

Ethanol production jumped 2.5 percent to 853,000 barrels a day in the week ended April 19, EIA data show, down 1.4 percent from a year earlier.

Stockpiles at 17.6 million barrels were down 19 percent from a year ago, EIA said.

The agency is set to release the latest figures tomorrow at 10:30 a.m. in Washington.

In cash market trading, ethanol in the U.S. Gulf slumped 6 cents to $2.555 a gallon, data compiled by Bloomberg show. In the West Coast the additive rose 2 cents to $2.775 and in New York the biofuel climbed 3 cents to $2.70. Chicago prices were unchanged at $2.565 a gallon.

West Coast ethanol’s premium over the U.S. Gulf expanded 8 cents to 22 cents, the highest since April 18. Chicago’s discount to New York Harbor swelled 3 cents to 13.5 cents.

Ethanol imports in the week ended April 19 averaged 39,000 barrels a day, the first time U.S. companies made foreign purchases of the fuel since March 29, EIA data showed.

Anhydrous ethanol in Sao Paulo cost $2.64 a gallon as of April 19, data compiled by Bloomberg show.

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