November 26th, 2012

Ethanol futures in Chicago climbed against gasoline for a second day as Brazil’s sugarcane harvest neared its end.

The biofuel, made from corn in the U.S. and from sugarcane in Brazil, gained as industry association Unica said sugar mills in Brazil’s sugarcane belt will begin to shut down in the coming weeks. The mills crushed 42 percent more cane in the first half of November than they did a year earlier.

“That maybe gave the market a little bit of hope that the supply from Brazil will dry up sooner rather than later,” said Jerrod Kitt, an analyst with Linn Group in Chicago.

Production declined 13,000 barrels a day to 811,000 in the week ended Nov. 16, the lowest level for any week in November since the Energy Department began publishing weekly data in 2010. Corn reached a three-week high.

Ethanol futures discount to gasoline narrowed to 32.03 cents a gallon from 35.19 cents on Nov. 23, based on December futures prices. The difference was 99.8 cents on Sept. 28.

Denatured ethanol for December delivery rose 1.4 cents, or 0.6 percent, to settle at $2.406 a gallon on the Chicago Board of Trade. Prices have gained 9.3 percent this year.

Gasoline futures for December delivery slipped 1.76 cents, or 0.6 percent, to $2.7263 a gallon on the New York Mercantile Exchange. The contract covers reformulated gasoline, made to be blended with ethanol before delivery to filling stations.

Corn for March delivery advanced 0.2 percent to close at $7.5125 a bushel in Chicago, the highest settlement since Nov. 1. One bushel makes at least 2.75 gallons of ethanol.

Based on December contracts for corn and ethanol, producers are losing 31 cents on each gallon of the fuel made, excluding the revenue that can be pocketed from the sale of dried distillers’ grains, a byproduct of ethanol production that can be fed to livestock, data compiled by Bloomberg show.

- Joshua Falk in New York at Bloomberg.

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