Ethanol futures fell a second day in Chicago on speculation the surge in corn prices will erode demand for the biofuel feedstock.
Prices slipped after an Energy Department report showed ethanol production in the U.S. dropped 4.2 percent to 821,000 barrels a day last week, the lowest level since July 2010 and the steepest weekly drop since April 2011.
“If corn prices continue to move up toward the $8 level, we’re going to see considerable demand destruction over the next couple months,” said Terry Reilly, an analyst at Citigroup Global Markets Inc. in Chicago.
Denatured ethanol for August delivery declined 2.8 cents, or 1.1 percent, to $2.44 a gallon on the Chicago Board of Trade. Prices have increased 11 percent this year.
In cash market trading, ethanol in the U.S. Gulf dropped 5.5 cents, or 2.2 percent, to $2.47 a gallon and in Chicago the additive decreased 5 cents, or 2 percent, to $2.41, according to data compiled by Bloomberg.
Ethanol in New York declined 5 cents, or 1.9 percent, to $2.53 a gallon and on the West Coast the additive slumped 4 cents, or 1.5 percent, to $2.63.
Corn for December delivery slid 12.75 cents, or 1.8 percent, to $7.0475 a bushel in Chicago.
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