Ethanol Hits 30-Month High on USDA Numbers

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The following article is from Bloomberg:

Ethanol futures soared to the highest price since July 2008 after a government report showed the U.S. corn harvest will be smaller than estimated last month, raising the cost of making the gasoline additive.

The biofuel followed corn higher after the Agriculture Department said the surplus on Aug. 31, the end of the marketing year, will be 675 million bushels, below the 745 million forecast in January. One bushel of corn distills into about 2.75 gallons of ethanol.

“Today’s nothing more than ethanol trying to keep pace with the outside market,” said Mike Blackford, a consultant at FCStone LLC in Des Moines, Iowa. “The USDA is reluctant to change the trend on demand. Ethanol is just trying to follow suit.”

Denatured ethanol for March delivery advanced 7 cents, or 2.9 percent, to $2.457 a gallon on the Chicago Board of Trade, the highest price since July 31, 2008. Futures are 40 percent higher than a year ago.

In cash market trading, ethanol on the West Coast rose 9 cents, or 3.7 percent, to $2.555 a gallon and in New York the additive jumped 7 cents, or 2.8 percent, to $2.56, according to data compiled by Bloomberg.

Ethanol in the U.S. Gulf gained 6.5 cents, or 2.6 percent, to $2.53 a gallon and in Chicago the alternative fuel climbed 6 cents, or 2.5 percent, to $2.425.

Prices Capped


Blackford said ethanol prices are capped by lower demand and ample supply.

Production fell 0.9 percent to 900,000 barrels a day last week, the Energy Department said today, while stockpiles swelled 3.6 percent to 19.6 million barrels, the highest level since July 16.

Corn for March delivery advanced 24.25 cents, or 3.6 percent, to $6.98 a bushel in Chicago, the highest price since July 7, 2008. The grain is the primary ingredient in ethanol in the U.S.

Average ethanol mills in Iowa and Illinois are losing 9 cents on every gallon produced on a spot basis, according to Ag Trader Talk, an online grains information service in Clive, Iowa.

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.

Source:  Bloomberg

Posted by Haylie Shipp

 

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