Ethanol declined to a six-week low after a government report showed production of the biofuel rose to a record.
Futures fell after the Energy Information Administration said output rose 3 percent to 972,000 barrels a day last week, the most in four years of weekly data from the Energy Information Administration.
Corn prices that have dropped 34 percent in the past year have helped reduce production costs for ethanol makers and allowed them to boost operations. One bushel of the grain makes at least 2.75 gallons of the renewable fuel.
"People are looking to place gallons and get rid of supply that they may have laying around," Mark Ruyack, a manager at StarFuels Inc., a Jupiter, Florida-based broker, said today in a telephone interview.
Denatured ethanol for July delivery slumped 8.5 cents, or 4 percent, to settle at $2.057 a gallon on the Chicago Board of Trade, the lowest level since May 6. Prices have increased 7.6 percent this year.
Domestic corn production is set to reach a record 13.936 billion bushels from 13.925 billion last year, the U.S. Agriculture Department forecast in a June 11 report.
Corn for July delivery increased 2.75 cents, or 0.6 percent, to $4.415 a bushel in Chicago. The corn crush spread, or the difference between the price of the grain and a gallon of ethanol, was at 45 cents.
Gasoline for July delivery rose 0.71 cent to $3.0982 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 widened to $1.0412 a gallon, the widest since April 18, 2012.
Stockpiles of the biofuel declined 3.1 percent to 17.9 million barrels, the least since May 23.
In cash market trading, ethanol sank 13 cents to $2.295 on the West Coast, 13 cents to $2.145 on the Gulf Coast, 11.5 cents to $2.105 in Chicago and 6 cents to $2.17 in New York, data compiled by Bloomberg show.
Corn-based ethanol Renewable Identification Numbers, the certificates attached to each gallon of biofuel that helps the government track consumption mandates, were at 49 cents for 2014 and 48.5 cents for 2013, according to data compiled by Bloomberg.
Advanced RINs, which covers biodiesel, was at 52 cents for 2014 and 46 cents for 2013.