Bloomberg News

Ethanol Gains Second Day as Corn Advances on Smaller Supply

October 01, 2012

Ethanol futures rose for a second day in Chicago as corn advanced.

The biofuel gained after a Sept. 28 Agriculture Department report said inventories at the start of the month totaled 988 million bushels, down 12 percent from a year earlier and the lowest level since 2004. One bushel of corn makes at least 2.75 gallons of ethanol.

“It’s like scratching a chalkboard trying to get corn from the farmers,” said Chris Wilson, an analyst at Atten Babler Risk Management LLC in Galena, Illinois. “Guys are still having trouble procuring corn. Day-to-day it’s still correlated to the corn price.”

Denatured ethanol for October delivery climbed 0.1 cent to settle at $2.345 a gallon on the Chicago Board of Trade, the highest price since Sept. 14. The futures have jumped 6.5 percent this year.

In cash market trading, ethanol in New York advanced 5.5 cents, or 2.3 percent, to $2.45 a gallon and in Chicago the additive increased 4.5 cents, or 1.9 percent, to $2.36, data compiled by Bloomberg showed.

Ethanol on the West Coast added 3 cents, or 1.2 percent, to $2.485 a gallon and in the U.S. Gulf the biofuel rose 1.5 cents to $2.42.

Corn for December delivery gained 0.5 cent to $7.5675 a bushel in Chicago.

Based on December contracts for ethanol and corn, plants are losing about 40 cents on each gallon of the biofuel produced, according to data compiled by Bloomberg. That doesn’t include profit from the sale of dried distillers’ grains, a byproduct of ethanol production that can be fed to livestock.

Abengoa SA (ABG), a Spanish engineering and renewable energy company, will temporarily idle its Madison, Illinois, ethanol plant for maintenance and because of poor production margins, Christopher Standlee, a spokesman for the company said today in a telephone interview.

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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