Ethanol gained the most in two weeks against gasoline as production costs increased.
The grain-based additive discount to gasoline narrowed to 54.89 cents a gallon, based on prompt-month contracts for both commodities, from 57.44 cents yesterday, the biggest contraction since Dec. 21 and the narrowest since Dec. 25.
“The corn market recovered slightly today,” said Michael Breitenbach, an analyst and trader at Blue Ocean Brokerage LLC in New York. “That is driving most of the strength in ethanol, despite weakness in gasoline.”
Denatured ethanol for February delivery rose 1 cent, or 0.5 percent, to settle at $2.23 a gallon on the Chicago Board of Trade, the highest since Dec. 18. Prices have fallen 1.2 percent in the past year.
In cash market trading, ethanol in Chicago added 1.25 cents, or 0.6 percent, to $2.20 a gallon and in the U.S. Gulf the biofuel increased 0.75 cent, or 0.3 percent, to $2.25, data compiled by Bloomberg show.
Ethanol in New York slipped 0.5 cent to $2.285 a gallon and on the West Coast the additive was unchanged at $2.335.
Corn for March delivery advanced 5.5 cents, or 0.8 percent, to $6.9425 a bushel in Chicago. One bushel makes at least 2.75 gallons of ethanol.
Based on March contracts for corn and ethanol, producers are losing 27 cents on each gallon of the fuel made, up from 26 cents yesterday, according to data collected by 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.
Gasoline for February delivery fell 1.55 cents, or 0.6 percent, to $2.7789 a gallon on the New York Mercantile Exchange. The contract covers reformulated gasoline, which is made to be blended with ethanol before delivery to filling stations.
Prices for the motor fuel declined after the Energy Department reported that stockpiles rose 7.41 million barrels to 233.1 million in the week ended Jan. 4, the highest level since Feb. 25, 2011.
Ethanol also gained after the report showed inventories fell 1.8 percent to 19.9 million barrels, a five-week low and the third straight stocks drop, the longest streak since the period ended July 6.
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