Bloomberg News

Ethanol Ends Rally on Speculation Production Costs Will Drop

December 29, 2011

Dec. 29 (Bloomberg) -- Ethanol futures snapped the longest winning streak in a year after a report showed record U.S. production and on speculation favorable weather in South America will reduce manufacturing costs.

Prices sank the most in more than two weeks on a forecast for rain in South America that may revive dry crops and reduce the need for supplies from the U.S.

The Energy Department said production of ethanol, made from corn in the U.S., increased 2 percent to 962,000 barrels a day in the week ended Dec. 23, the highest level since the government began issuing the report in June 2010.

Denatured ethanol for January delivery fell 2.9 cents, or 1.3 percent, to settle at $2.202 a gallon on the Chicago Board of Trade, the steepest decline since Dec. 14. The drop ended the longest streak of gains since Dec. 29, 2010. Prices have fallen 7.4 percent this year and are headed for the first yearly drop since 2008.

Corn for March delivery declined 4.5 cents, or 0.7 percent, to $6.38 a bushel in Chicago. One bushel makes at least 2.75 gallons of ethanol.

--Editors: Charlotte Porter, Margot Habiby

To contact the reporter on this story: Mario Parker in Chicago at mparker22@bloomberg.net

To contact the editor responsible for this story: Bill Banker at bbanker@bloomberg.net


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