Bloomberg News

Ethanol’s Discount to Gasoline Strengthens on Corn Supplies

January 14, 2013

Ethanol’s discount to gasoline strengthened to the narrowest in four weeks as smaller corn supplies signaled higher costs.

The spread contracted 2.44 cents as ethanol extended its longest streak of gains since July on signs of higher feedstock prices. An Agriculture Department report on Jan. 11 showed corn stockpiles in the U.S. on Dec. 1 totaled 8.03 billion bushels, 17 percent less than a year earlier.

“The corn market’s strong so ethanol’s trying to follow along with it,” said Mike Blackford, a consultant at INTL FCStone in Des Moines, Iowa. “Ethanol’s got to stay with corn to make sure the plants stay on.”

Ethanol was 42.41 cents a gallon below the price of gasoline, based on prompt-month contracts for both commodities. That was less than the 44.85 cents on Jan. 11 and the smallest gap since Dec. 17.

Denatured ethanol for February delivery rose 3.9 cents, or 1.7 percent, to settle at $2.33 a gallon on the Chicago Board of Trade, the highest price since Dec. 11. Prices have advanced 9.9 percent in the past year.

Corn for March delivery advanced 15.25 cents, or 2.2 percent, to $7.24 a bushel in Chicago, the highest price since Dec. 17. The futures have risen 21 percent in the past year.

Losing Money

Based on March contracts for corn and ethanol, producers are losing 28 cents on each gallon of the fuel made, up from 27 cents on Jan. 11, 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.

In cash market trading, ethanol on the West Coast jumped 6 cents, or 2.5 percent, to $2.45 a gallon and in the U.S. Gulf the additive increased 6 cents, or 2.6 percent, to $2.385, data compiled by Bloomberg show.

Ethanol in New York gained 3.5 cents, or 1.5 percent, to $2.40 a gallon and in Chicago the biofuel rose 2.5 cents, or 1.1 percent, to $2.30.

Gasoline for February delivery increased 1.46 cents, or 0.5 percent, to $2.7541 a gallon on the New York Mercantile Exchange. The contract covers gasoline that’s made to be blended with ethanol before delivery to filling stations.

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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