Ethanol Falls First Time in Two Weeks as Demand Subsides

Dec 30, 2013 4:13 pm ET

Dec. 30 (Bloomberg) -- Ethanol fell for the first time in more than two weeks on speculation that demand for the biofuel will subside as higher production refills stockpiles.

Futures declined 0.9 percent as spot prices slid in each of the major U.S. trading hubs. Ethanol in New York Harbor reached $3.60 a gallon on Dec. 6, the highest price in more than seven years, on below-average supply, data compiled by Bloomberg show.

“The physical market has kind of stalled out,” said Mike Blackford, a consultant at INTL FCStone in Des Moines, Iowa. He said demand for motor fuel may drop after the Christmas and New Year holiday travel period.

Denatured ethanol for January delivery slipped 1.8 cents to settle at $1.942 a gallon on the Chicago Board of Trade. Prices are down 11 percent this year.

Gasoline for January delivery dropped 2.84 cents, or 1 percent, to $2.7877 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’s discount to gasoline narrowed 1.04 cents to 84.57 cents a gallon.

In cash market trading, ethanol tumbled 8 cents to $2.17 a gallon in Chicago, 9.5 cents to $2.505 on the West Coast, 7.5 cents to $2.325 in New York and 7 cents to $2.275 in the Gulf Coast, data compiled by Bloomberg show.

Chicago’s discount to New York fell 5 cents to 15.5 cents and the West Coast’s premium to the Gulf shrank by 2.5 cents to 23 cents.

Corn Prices

Corn futures for March delivery fell 4 cents, or 0.9 percent, to $4.235 a bushel in Chicago. One bushel makes at least 2.75 gallons of ethanol.

The corn crush spread, or the difference between the cost of corn and the price of ethanol, was 23 cents, up from 22 cents on Dec. 27, data compiled by Bloomberg show.

“There’s still decent margins at this point,” Blackford said.

Ethanol production has averaged above 900,000 barrels a day since Oct. 25, Energy Information Administration data show, compared with 839,000 barrels a day this year through Oct. 18.

The EIA, the Energy Department’s statistical arm, is scheduled to release the latest ethanol production and supply data 11 a.m. on Jan. 3 in Washington.

A report from the agency today showed that U.S. ethanol exports averaged 41,000 barrels a day in October, down 4.7 percent from the previous month.

--Editors: Charlotte Porter, Richard Stubbe