Bloomberg News

Ethanol Declines on Ample Inventories and Lower Feedstock Costs

August 24, 2012

Ethanol futures declined for a third day in Chicago on ample stockpiles of the biofuel and lower prices for corn.

Futures fell 1 percent on the drop for corn, the primary ingredient in U.S.-made ethanol. An Aug. 22 Energy Department report showed inventories last week rose 0.3 percent to 18.5 million barrels, 1.4 percent higher than a year earlier.

“There seems to be a lot of ethanol for sale,” said Jim Damask, a manager at BiofuelsConnect, a Jupiter, Florida-based alternative energy broker. “There’s some inventory that hasn’t been scooped up yet.”

Denatured ethanol for September delivery slid 2.7 cents to $2.601 a gallon on the Chicago Board of Trade, the lowest settlement since Aug. 17. The futures have gained 18 percent this year.

“It’s going to have a hard time rallying until we can eat through some of that inventory,” Damask said.

In cash market trading, ethanol was unchanged in New York at $2.68 a gallon, in Chicago at $2.615 and in the U.S. Gulf at $2.675 a gallon, data compiled by Bloomberg show. Prices on the West Coast dropped 1 cent, or 0.4 percent, to $2.75.

Ethanol production in the U.S. has rebounded 3.4 percent to 823,000 barrels a day from a more than two-year low of 796,000 in the week ended July 20, Energy Department data shows.

Corn Futures

Corn for December delivery declined 6.25 cents, or 0.8 percent, to $8.085 a bushel in Chicago. One bushel makes at least 2.75 gallons of the renewable fuel.

Producers are losing 32 cents on each gallon of ethanol manufactured, based on the September contracts for corn and the biofuel, Bloomberg data show.

Plants can ease those losses by selling dried distillers grains, a byproduct of ethanol production that can be fed to cattle and livestock.

The value of Renewable Identification Numbers, known as RINs, fell 1.3 percent to 3.7 cents, data compiled by Bloomberg show. They are credits that help the government track whether refiners are meeting 2012 federal ethanol use mandates.

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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