Bloomberg News

Ethanol Rebounds From Five-Week Low on Signs of Higher Costs

September 04, 2012

Ethanol futures rebounded from a five-week low on concern the corn crop will be lower than government estimates, raising costs to make the biofuel.

Prices followed the grain higher as Allendale Inc. estimated that the U.S. crop will be 10.326 billion bushels this year, below the 10.779 billion the Agriculture Department forecast Aug. 10.

“You did get some support to the upside in ethanol from corn,” said Jerrod Kitt, an analyst at Linn Group in Chicago. “At an $8 price tag, they’re very hand-to-mouth here. They’re covering their immediate needs and that’s about it.”

Denatured ethanol for September delivery rose 1 cent, or 0.4 percent, to settle at $2.563 a gallon on the Chicago Board of Trade today. Futures have gained 16 percent this year.

In cash market trading, ethanol was unchanged on the West Coast at $2.725 a gallon and in New York the additive increased 1 cent, or 0.4 percent, to $2.675, data compiled by Bloomberg shows.

Ethanol in the U.S. Gulf added 1 cent, or 0.4 percent, to $2.645 a gallon and in Chicago the biofuel jumped 0.5 cent to $2.58.

Corn for December delivery climbed 5.25 cents, or 0.7 percent, to $8.05 a bushel in Chicago. The most-active contract touched a record $8.49 on Aug. 10.

Producers are losing 37 cents a gallon making ethanol from corn, based on September contracts. A bushel yields about 2.75 gallons of ethanol.

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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