Bloomberg News

Ethanol Declines as Corn Prices Drop After Inventory Forecast

October 12, 2011

Oct. 12 (Bloomberg) -- Ethanol declined for the first time in three days as corn prices fell from yesterday, when the grain advanced the most since June 2010.

The biofuel declined 0.1 percent in Chicago after the U.S. Department of Agriculture reported that corn inventories will be 29 percent larger than forecast last month. Corn, the primary ingredient in U.S.-made ethanol, is the nation’s largest crop, valued at $66.7 billion last year, according to USDA data.

“I’m surprised it didn’t pull back more,” Jim Damask, a manager at BiofuelsConnect, a Jupiter, Florida-based alternative energy broker, said by telephone. “A four-cent or five-cent pullback on corn probably is pretty normal after what we saw yesterday.”

Denatured ethanol for November delivery fell 0.3 cent to settle at $2.627 a gallon on the Chicago Board of Trade. Yesterday, it gained the most since July 5.

Corn futures for December delivery fell 4.25 cents, or 0.7 percent, to $6.4075 a bushel on the Chicago Board of Trade.

In cash market trading, ethanol in New York fell 1 cent, or 0.4 percent, to $2.825 a gallon, and on the West Coast the biofuel added 1 cent, or 0.4 percent, to $2.855, according to data compiled by Bloomberg.

Ethanol in the U.S. Gulf fell 12.5 cents, or 4.5 percent, to $2.65 a gallon, and in Chicago the additive declined 1.5 cents, or 0.6 percent, to $2.675, Bloomberg data show.

Gasoline for November delivery rose 0.11 cent to settle at $2.7487 a gallon in New York. The contract covers reformulated gasoline, which is made to be blended with ethanol before delivery to filling stations.

--With assistance from Jeff Wilson in Chicago. Editors: Charlotte Porter, Bill Banker

To contact the reporter on this story: Justin Doom in New York at jdoom1@bloomberg.net

To contact the editor responsible for this story: Dan Stets at dstets@bloomberg.net


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