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Ethanol Declines for Second Week as Cheaper Corn Reduces Costs

January 17, 2014
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Ethanol futures capped a second weekly decline as cheaper corn eased production costs for distillers to make the biofuel.

Futures fell 2.1 percent as corn, the primary ingredient used to make the additive, slumped on speculation that rain in South American will aid crops. The corn crush spread, or the price difference between corn and ethanol, was 27 cents a gallon, down from 28 cents yesterday and compared to losses a year earlier.

"We’re seeing producers selling," said Jim Damask, a broker at StarFuels Inc., in Jupiter, Florida. "The margins are still there. It’s pretty juicy for them, so anytime they find some gallons they sell because money’s on the table and there’s no need to put it in storage."

Denatured ethanol for February delivery dropped 4.1 cents, or 2.1 percent, to $1.88 a gallon on the Chicago Board of Trade, the lowest price since Dec. 18 and capping a 3.8 percent decline this week. Futures have fallen 19 percent in the past year.

Gasoline for February delivery gained 2.53 cents, or 1 percent, to $2.6204 a gallon on the New York Mercantile Exchange. The futures cover reformulated gasoline, made to be blended with ethanol before delivery to filling stations.

Ethanol’s discount to gasoline widened 6.63 cents to 73.24 cents a gallon.

Corn for March delivery sank 4 cents, or 0.9 percent, to $4.24 a bushel in Chicago, capping the biggest weekly drop since Nov. 1.

 

Cash Trading

 

In cash market trading, ethanol declined 2.5 cents to $2.355 a gallon in New York, 2 cents to $2.08 in Chicago, 1.5 cents to $2.205 on the Gulf Coast and 5 cents to $2.575 on the West Coast, data compiled by Bloomberg show.

West Coast’s premium to the Gulf narrowed 3.5 cents to 37 cents, while Chicago’s discount to New York slimmed 0.5 cent to 27.5 cents.

The U.S. tracks compliance with ethanol consumption mandates with Renewable Identification Numbers, certificates attached to each gallon of biofuel that can be traded among refiners.

Corn-based RINs for 2014 rose 0.5 cent to 31 cents and 2013 RINs rose 0.5 cent to 31 cents, data compiled by Bloomberg show.

 

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RELATED TOPICS: Corn, Marketing, Ethanol

 
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