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Ethanol futures fell in Chicago as rain and cooler weather in the U.S. Midwest provided some relief to drought-withered corn crops.
Ethanol tumbled after rain over the weekend improved the prospects for corn, the primary ingredient used to produce ethanol in the U.S. Distillers have responded to higher corn prices brought about by drought by cutting output by 16 percent to 809,000 barrels a day from a record 963,000 on Dec. 30.
“The weather has been moderating here a little bit,” said Will Babler, a broker at Atten Babler Risk Management LLC in Galena, Illinois. “You had corn off here and kind of losing a bit of steam. Corn’s the weak link and continues to drive the market.”
Denatured ethanol futures for September delivery fell 1.1 cents, or 0.4 percent, to $2.578 a gallon on the Chicago Board of Trade. Futures have advanced 17 percent this year.
In cash market trading, ethanol on the West Coast slumped 4.5 cents, or 1.6 percent, to $2.755 a gallon and in Chicago the additive decreased 4 cents, or 1.6 percent, to $2.545, according to data compiled by Bloomberg.
Ethanol futures in New York sank 2.5 cents to $2.64 a gallon and in the U.S. Gulf the biofuel fell 2 cents to $2.615.
Corn futures for December delivery slipped 2.5 cents, or 0.3 percent, to $8.05 a bushel in Chicago.
Assuming one bushel of the grain distills into at least 2.75 gallons of ethanol, companies stand to lose 48 cents on every gallon produced, based on the December contracts for the commodities, according to data compiled by Bloomberg.
“Everybody’s pushed back on run rates and reduced production,” Babler said. “It’s still a tough environment.”
- Mario Parker in Chicago at Bloomberg.