Bloomberg News

Ethanol Rises for Third Day on Speculation of China Corn Demand

March 13, 2012

Ethanol futures gained for a third day in Chicago as corn rose, signaling higher production costs for the biofuel.

Prices increased on speculation that Chinese demand for corn is increasing. Argentina, the world’s second-biggest exporter of the grain behind the U.S., said it will delay granting export permits because of tight supply after a drought.

“Some of that translates over into ethanol,” said Will Babler, a broker at First Capitol Risk Management Inc. in Galena, Illinois. “On the front end it’s a bitter pill to swallow. They’re forced to stay with the pack” in paying higher prices for corn.

Denatured ethanol for April delivery climbed 1.7 cents, or 0.7 percent, to $2.311 a gallon on the Chicago Board of Trade, the highest price since Dec. 5. Prices have gained 4.9 percent this year.

In cash market trading, ethanol on the West Coast advanced 4 cents, or 1.7 percent, to $2.435 a gallon and in the U.S. Gulf the biofuel added 2 cents, or 0.9 percent, to $2.345, according to data compiled by Bloomberg.

Ethanol in Chicago rose 1 cent to $2.285 a gallon and in New York the additive increased 1 cent to $2.32.

Corn futures for May delivery rose 2.5 cents, or 0.4 percent, to $6.62 a bushel in Chicago.

Distillers are losing 8 cents per gallon of ethanol, based on current prices for corn and the biofuel and assuming a bushel of corn generates 2.75 gallons of ethanol, according to data compiled by Bloomberg.

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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