Bloomberg News

Ethanol Rises as Dollar Weakens Ahead of U.S. Election Results

November 06, 2012

Ethanol followed gasoline higher after the dollar weakened as U.S. voters headed to the polls today to pick a president and as thin margins forced companies to reduce output of the biofuel.

Prices gained after New Energy Corp. said it idled its 100 million-gallon-a-year plant in South Bend, Indiana, following similar moves by other companies, including Valero Energy Corp. U.S. stocks and commodities, such as gasoline, jumped as voters decide whether to return Barack Obama, a Democrat, as president or elect his challenger, Mitt Romney, a Republican.

“All eyes were on today’s election as the results will shape the next four years of policy,” SCB & Associates LLC in Chicago wrote in a report to clients. “Energy futures were higher for the second straight day from gains on Wall Street and a weakening dollar as investors wait on U.S. election results.”

Denatured ethanol for December delivery rose 1.3 cents, or 0.6 percent, to $2.345 a gallon on the Chicago Board of Trade. Prices have gained 6.5 percent this year.

In cash market trading, ethanol was unchanged in New York at $2.465 a gallon, in Chicago at $2.37 and in the U.S. Gulf at $2.45, data compiled by Bloomberg show, while the fuel on the West Coast declined 2 cents, or 0.8 percent, to $2.52 a gallon.

Corn for December delivery rose 5.5 cents, or 0.8 percent, to $7.41 a bushel in Chicago. One bushel makes at least 2.75 gallons of ethanol.

Based on December contracts for ethanol and corn, producers are losing about 35 cents on each gallon of the biofuel made, 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.

Gasoline Rises

Gasoline for December delivery jumped 7.87 cents, or 3 percent, to $2.6989 a gallon in New York. The contract covers reformulated gasoline, made to be blended with ethanol before delivery to filling stations.

Ethanol’s discount to the motor fuel increased to 35.39 cents from 31.02 cents Nov. 2. Gasoline traded at a premium of 99.8 cents to ethanol as recently as Sept. 28.

The dollar sank 0.14 percent against the euro.

The value of Renewable Identification Numbers, known as RINs, sank 3.3 percent to 3.67 cents, data compiled by Bloomberg show. RINs 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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