Bloomberg News

Ethanol’s Discount to Gasoline Steady as Corn Costs Slow Output

January 08, 2013

Ethanol’s discount to gasoline was little changed amid speculation that higher corn prices will curtail output that’s down 16 percent from a year ago.

The grain-based additive was 57.44 cents a gallon less expensive than gasoline, based on prompt-month contracts for both commodities, compared with 57.24 cents yesterday.

“A lot of producers were out here buying today,” said Jim Damask, a manager at StarFuels Inc. in Jupiter, Florida. “Some of them are short and corn’s strong. That’s put pressure on some of the guys. They’re getting a little nervous being short.”

Denatured ethanol for February delivery rose 1.5 cents, or 0.7 percent, to settle at $2.22 a gallon on the Chicago Board of Trade. Gasoline for February delivery gained 1.7 cents to $2.7944 a gallon on the New York Mercantile Exchange.

Corn for March delivery gained 3.25 cents, or 0.5 percent, to $6.8875 a bushel in Chicago. One bushel makes at least 2.75 gallons of ethanol.

In cash market trading, ethanol in Chicago climbed 3.25 cents, or 1.5 percent, to $2.1975 a gallon and in the U.S. Gulf the additive increased 3 cents, or 1.3 percent, to $2.265, data compiled by Bloomberg show.

Ethanol on the West Coast jumped 2.5 cents, or 1.1 percent, to $2.365 a gallon and in New York the biofuel advanced 1.5 cents, or 0.7 percent, to $2.28.

Producers of the fuel have tempered output as drought in the Midwest baked corn fields, cutting yields and raising prices.

March Contracts

Based on March contracts for corn and ethanol, producers are losing 27 cents on each gallon of the fuel made, unchanged from yesterday, according to data compiled y Bloomberg. The figures exclude the revenue that can be made from the sale of dried distillers’ grains, a byproduct of ethanol production that can be fed to livestock.

Output will remain at the current levels through the middle of the year before recovering from the drought, the Energy Department said today in its Short-Term Energy Outlook.

Idled capacity will restart in 2014 to meet the U.S. renewable fuels standards to use 14.4 billion gallons of ethanol from 13.8 billion required this year, it said.

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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