Bloomberg News

Ethanol Falls Fourth Day as Corn Eases on Signs of Lower Demand

August 27, 2012

Ethanol futures fell a fourth day in Chicago as corn prices eased on signs of slowing global demand for the grain.

Prices extended the longest streak of losses in a month after the Agriculture Department said corn supplies inspected for export in the week ended Aug. 23 fell 52 percent from a year earlier to the lowest since July 2003. Lower prices for the grain reduce costs to manufacture ethanol, as one bushel makes at least 2.75 gallons of the biofuel.

“The grains came down and as it stands the market looks weak,” said Dan Flynn, a trader at Price Futures Group in Chicago.

Denatured ethanol for September delivery fell 1.5 cents, or 0.6 percent, to $2.586 a gallon on the Chicago Board of Trade, the lowest settlement since Aug. 14, extending the longest band of declines since the period ended July 26. Prices have gained 17 percent this year.

In cash market trading, ethanol in Chicago gained 1 cent, or 0.4 percent, to $2.625 a gallon and in the U.S. Gulf the additive increased 1 cent, or 0.4 percent, to $2.685, data compiled by Bloomberg shows.

Ethanol on the West Coast slipped 1 cent, or 0.4 percent, to $2.74 a gallon and in New York the biofuel dropped 0.5 cent to $2.675.

Corn for December delivery dropped 7.75 cents, or 1 percent, to $8.0075 a bushel in Chicago. Ethanol has traded in the same direction of corn each of the last six sessions.

Gasoline for September delivery surged 7.68 cents, or 2.5 percent, to $3.1548 a gallon on the New York Mercantile Exchange, the highest price since April 30.

Discount to Gasoline

Ethanol’s discount to gasoline expanded 19 percent to about 57 cents, the steepest since June 19, based on the September contracts for both fuels.

Refiners, required by the U.S. to blend about 13.2 billion gallons of ethanol into gasoline this year, may use more than the government requires as they stand to pocket the difference between the two fuels.

The value of Renewable Identification Numbers, known as RINs, fell 1.4 percent to 3.65 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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