Ethanol Slips Against Gasoline as Corn Prices Decline

Ethanol tumbled versus gasoline on speculation that producers of the biofuel are seeing lower corn costs as the harvest begins.

The spread, or price difference, widened 9.42 cents to 83.12 cents a gallon as ethanol dropped with corn, the primary feedstock for the fuel in the U.S. The harvest is usually from September to November.

“We see producers out here really pushing it down, they’re selling,” said Jim Damask, a manager at StarFuels Inc., in Jupiter, Florida. “Corn must be showing up. They must be getting their hands on some cheap corn.”

Denatured ethanol for October delivery sank 5.8 cents, or 3.1 percent, to $1.828 a gallon on the Chicago Board of Trade. Futures have declined 17 percent this year.

Gasoline for October delivery gained 3.62 cents, or 1.4 percent, to $2.6592 a gallon on the New York Mercantile Exchange. The contract covers reformulated gasoline, made to be blended with ethanol before delivery to filling stations.

One bushel of corn makes at least 2.75 gallons of ethanol. Farmers responded to last summer’s drought that devastated yields by planting record acres of the grain.

Corn for December delivery slumped 4.5 cents, or 1 percent, to $4.4875 a bushel in Chicago. The December crush spread of corn to ethanol was minus 3 cents, down from break-even yesterday. All crush spreads through July 2016 were negative.

In cash market trading, ethanol dropped 60 cents to $2.375 a gallon in Chicago, 25 cents to $2.20 in New York, 5 cents to $2.275 on the West Coast and 0.5 cent to $2.325 on the West Coast, data compiled by Bloomberg show.

Chicago’s premium to New York Harbor contracted 35 cents to 17.5 cents, while the West Coast’s discount to the Gulf widened 4.5 cents to 5 cents.

EIA is scheduled to release the latest ethanol production, supply and import figures tomorrow at 10:30 a.m. in Washington.

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