Ethanol plunged the most in two weeks as cheaper prices for corn, the worst-performing commodity this year, make it more profitable for distillers to increase output.
Futures sank as much as 2.8 percent as corn declined, heading for the biggest annual drop since at least 1960 because of a record harvest. The grain is the primary feedstock for ethanol produced in the U.S., with one bushel making at least 2.75 gallons of the biofuel.
"With the price of corn going lower, that certainly helps" the ethanol producer, said Matt Janney, a broker at Futures International LLC in Chicago.
Denatured ethanol for January delivery fell 3.2 cents, or 1.6 percent, to $1.91 a gallon at 11:45 a.m. on the Chicago Board of Trade. Prices have dropped 13 percent this year, on track for a third straight annual decline, the biggest since 2008, and for a second consecutive quarterly drop.
Gasoline for January delivery slipped 0.21 cent to $2.7856 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 2.99 cents to 87.56 cents a gallon.
Corn futures for March delivery declined 0.75 cent to $4.2275 a bushel in Chicago. The grain has dropped 39 percent this year, the most among 24 commodities in the Standard & Poor’s GSCI Spot Index.
The corn crush spread, or the difference between the cost of corn and the price of ethanol, was 21 cents, down from 23 cents yesterday, data compiled by Bloomberg show.
Ethanol output has increased 20 percent to 926,000 barrels a day in the week ended Dec. 20 from a record low in January, data from the U.S. Energy Information Administration show.
Stockpiles last week were 15.7 million barrels, the highest level since Sept. 13, according to the EIA, the Energy Department’s statistical arm.
The latest production and supply data are scheduled to be released at 11 a.m. Jan. 3 in Washington.