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Ethanol Futures Tumble as Stockpiles Climb to Seven-Week High

December 11, 2013
The corn crush spread, or the difference between a gallon of ethanol and the corn needed to make it, was 7 cents, based on March contracts, down from 14 cents yesterday, data compiled by Bloomberg show.  

Dec. 11 (Bloomberg) -- Ethanol tumbled after a government report indicated that higher output rates are refilling stockpiles of the biofuel.

Futures dropped as much as 5.8 percent after the Energy Information Administration said inventories rose 2.1 percent to 15.4 million barrels last week, the most since Oct. 18 and the first two-week gain since October. Production was the highest since January 2012.

"We still have very good production rates, but we’re starting to see stocks push higher," said Shawn McCambridge, senior grain analyst at Jefferies Bache LLC in Chicago. "One week doesn’t make a trend, but the question has been will demand be good enough to offset the production increases."

Denatured ethanol for January delivery slumped 9.7 cents, or 4.8 percent, to $1.907 a gallon at 1:07 p.m. New York time on the Chicago Board of Trade. The futures have fallen 13 percent this year.

Gasoline for January delivery fell 2.72 cents, or 1 percent, to $2.6557 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 the motor fuel expanded 6.98 cents to 74.87 cents a gallon.

Production rose 3.4 percent to 944,000 barrels a day, the EIA, the Energy Department’s statistical arm, said in a weekly report today.

Ethanol refinery and blender inputs, a measure of demand, sank 1.3 percent to the lowest level since March 29, the EIA report showed.


Weaker Demand


Gasoline demand averaged over four weeks decreased 1.9 percent to 8.76 million barrels a day, the lowest level since Sept. 27, according to EIA.

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