Ethanol Slips Against Gasoline on Higher Returns, Lower Exports

Ethanol’s discount to gasoline expanded as producers of the biofuel sold to take advantage of the highest corn crush spreads this year and as exports sank. Renewable Identification Numbers tumbled.

The spread, or price difference, widened 0.29 cent to 60.14 cents a gallon a day after the corn crush spread, or the price difference between a gallon of ethanol and the corn needed to make it, touched 66 cents. Separately, RINs dropped after the government said the amount issued in July rose.

“They’re letting it go at the right price,” said Mark Ruyack, a manager at StarFuels Inc. in Jupiter, Florida. “They’re keeping the tanks wet.”

Denatured ethanol for September delivery fell 3.1 cents, or 1.2 percent, to $2.465 a gallon on the Chicago Board of Trade. Futures, which have gained 13 percent this year, are headed for the first monthly gain since May and the largest since January.

Gasoline for September delivery decreased 2.81 cents, or 0.9 percent, to $3.0664 a gallon on the New York Mercantile Exchange. The contract covers reformulated gasoline, made to be blended with ethanol before delivery to filling stations.

A 2007 energy law requires refiners to use 13.8 billion gallons of ethanol this year and 14.4 billion in 2014. Compliance is tracked by Renewable Identification Numbers, certificates attached to each gallon of ethanol that are submitted to the government each year and that also can be traded among companies.

Ethanol RINs

The program is enforced by the U.S. Environmental Protection Agency and the number of certificates produced last month was above average, according to data from Bloomberg Industries.

Corn-based ethanol RINs decreased 1 cent to 62 cents, data compiled by Bloomberg show. Advanced RINs, which cover biodiesel and Brazilian sugarcane-based ethanol, fell 3 cents to 72 cents.

Corn for September delivery declined 7 cents, or 1.4 percent, to $4.9725 a bushel in Chicago. The more actively traded December contract added 0.75 cent to $4.815. The crush spread based on settlement prices was 65.7 cents, down from the previous day’s 66.2 cents, the highest level of 2013.

Ethanol production fell 2.8 percent to 820,000 barrels a day last week, the lowest since March 29, data from the Energy Department’s statistical arm show.

Stockpiles slid 1.4 percent to 16.3 million barrels, the lowest since July 5, and imports plunged 79 percent to 4,000 barrels a day, it said.

In cash market trading, ethanol was unchanged in New York at $2.80 a gallon, data compiled by Bloomberg show. The price slipped 2.5 cents to $2.69 in Chicago, 2.5 cents to $2.785 on the Gulf Coast and 1 cent to $2.84 on the West Coast.

West Coast ethanol’s premium to the Gulf expanded 1.5 cents to 5.5 cents. Chicago’s discount to New York Harbor widened 2.5 cents to 11 cents.

Exports of the biofuel slumped 17 percent in June from May to the lowest level since August, 2010, an Energy Information Administration report showed today.

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