Bloomberg News

Ethanol Gains Against Gasoline on Higher Corn and Lower Supply

December 03, 2012

Ethanol strengthened against gasoline as supplies fell and rising corn prices signaled higher production costs.

The grain-based additive’s discount to gasoline was 29.85 cents a gallon, compared with 35.34 cents Nov. 30, based on futures settlement prices. The spread has averaged 62.67 cents this year, enticing refiners to blend more ethanol in order to pocket the difference between the two fuels.

“There’s still plenty of blending value,” said Ian Jackson, a trader at SCB & Associates LLC in Chicago. “We’re seeing less and less imports and a draw in stockpiles.”

Denatured ethanol for December delivery rose 2 cents, or 0.8 percent, to $2.428 a gallon on the Chicago Board of Trade. The contract expires Dec. 5. Futures have gained 10 percent this year.

Imports averaged 27,000 barrels a day in the week ended Nov. 23, Energy Department data show. That was down 78 percent from the Oct. 12 level, which was the highest since the agency began tracking weekly data for the biofuel in June 2010.

Stockpiles have fallen in three of the past four weeks, to 18.3 million barrels as of Nov. 23, the lowest since Nov. 9.

In cash market trading, ethanol on the West Coast gained 2.5 cents, or 1 percent, to $2.60 a gallon and in the U.S. Gulf the additive rose 1 cent to $2.495, according to data compiled by Bloomberg.

Spot Trading

Ethanol in New York climbed 0.5 cent to $2.525 a gallon and in Chicago the additive increased 0.5 cent to $2.43.

Gasoline for January delivery decreased 0.38 cents to $2.7265. The contract covers reformulated gasoline, made to be blended with ethanol before delivery to filling stations.

Corn for March delivery advanced 2 cents, or 0.3 percent, to $7.5475 a bushel in Chicago. One bushel makes at least 2.75 gallons of ethanol.

Based on December contracts for corn and ethanol, producers are losing 30 cents on each gallon of the fuel made, down from 31 cents on Nov. 30, 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.

The value of Renewable Identification Numbers, known as RINs, rose 11 percent to 4.85 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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