Bloomberg News

Ethanol Gains Against Gasoline a Fourth Day on Output Costs

November 28, 2012

Ethanol strengthened against gasoline, narrowing the motor fuel’s premium for a fourth day, on speculation that a recent gain in corn prices signals higher production costs.

The grain-based additive’s discount to gasoline contracted to 28.79 cents a gallon, the least since Nov. 8, from 29.41 cents yesterday, based on December futures prices. The difference has averaged 63.04 cents this year.

Corn, the primary feedstock used to make ethanol in the U.S., was unchanged after gaining 2.5 percent the past three sessions, on concern that demand for the grain will increase as drought in the U.S. Great Plains erodes wheat crop conditions.

“We’ve got a negative trend in the energies and a little positive on grains and ethanol,” said Mike Blackford, a consultant at INTL FCStone in Des Moines, Iowa.

Denatured ethanol for December delivery rose 0.8 cent, or 0.3 percent, to $2.446 a gallon on the Chicago Board of Trade, the highest settlement price since Oct. 11. The futures have climbed 11 percent this year.

In cash market trading, ethanol in New York rose 2.5 cents, or 1 percent, to $2.525 a gallon and in Chicago the additive increased 2.5 cents, or 1 percent, to $2.425, data compiled by Bloomberg shows.

Ethanol in the U.S. Gulf climbed 2 cents, or 0.8 percent, to $2.475 a gallon and on the West Coast the biofuel added 1 cent, or 0.4 percent, to $2.58.

Gasoline Futures

Gasoline for December delivery gained 0.18 cent to $2.7339 a gallon on the New York Mercantile Exchange. The contract covers reformulated gasoline, made to be blended with ethanol before delivery to filling stations.

Ethanol-blended gasoline made up about 93 percent of the total U.S. gasoline pool in the week ended Nov. 23, a seven-week high, Energy Department data show.

Corn for March delivery was unchanged at $7.64 a bushel in Chicago. The price earlier rose to $7.675.

Based on December contracts for corn and ethanol, producers are losing 32 cents on each gallon of the fuel made, unchanged from yesterday, excluding the revenue that can be pocketed from the sale of dried distillers’ grains, a byproduct of ethanol production that can be fed to livestock, according to data collected by Bloomberg.

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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