Bloomberg News

Ethanol Advances on Concern That South American Crops Damaged

January 09, 2012

Jan. 9 (Bloomberg) -- Ethanol futures advanced to a five- week high in Chicago as bad weather in South America threatens corn crops.

Futures followed corn higher on speculation South American corn has been damaged by hot, dry weather, which could translate to increased demand for U.S. supply. Ethanol is made from the grain in the U.S.

“They know we’re going to have shortages of corn in South America,” said Dan Flynn, a trader at PFG Best in Chicago. “That’s going to play right into the hands of the ethanol market. It’s going to be more expensive to make.”

Denatured ethanol for February delivery rose 3.5 cents, or 1.6 percent, to settle at $2.258 a gallon on the Chicago Board of Trade, the highest price since Dec. 5. Futures have fallen 0.8 percent in the past year.

In cash market trading, ethanol in the U.S. Gulf declined 3 cents, or 1.3 percent, to $2.295 a gallon and in New York the additive increased 1.5 cents, or 0.7 percent, to $2.315, according to data compiled by Bloomberg.

Ethanol in Chicago added 1 cent, or 0.5 percent, to $2.205 a gallon and on the West Coast, the biofuel climbed 1 cent, or 0.4 percent, to $2.33.

Corn futures for March delivery rose 8.5 cents, or 1.3 percent, to $6.52 a bushel in Chicago, gaining for the first time since Jan. 3. One bushel makes at least 2.75 gallons of ethanol.

--With assistance from Jeff Wilson in Chicago. Editors: Charlotte Porter, Richard Stubbe

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

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


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