March 6th, 2013

Ethanol futures strengthened against gasoline as stockpiles of the biofuel fell to the lowest level ever for this time of year.

The spread narrowed 2.83 cents to 68.79 cents a gallon at 10:57 a.m. New York time after an Energy Information Administration report showed U.S. inventories were 19.4 million barrels for the week ended March 1, the lowest level for the first week of the month in records going back to 2010.

“Seems like there’s less and less available and people are paying higher prices to get what they need,” said Jim Damask, a manager at Starfuels in Jupiter, Florida.

Denatured ethanol for April delivery rose 0.1 cent to $2.438 a gallon on the Chicago Board of Trade.

Gasoline futures for April delivery dropped 2.23 cents, or 0.7 percent, to $3.1259 a gallon on the New York Mercantile Exchange. The contract covers reformulated gasoline, which is made to be blended with ethanol before delivery to filling stations.

Higher corn prices have eroded margins at ethanol plants and prompted at least 19 companies to idle operations since June, according to the Renewable Fuels Association, a Washington-based trade group.

Corn for March delivery slipped 7 cents, or 1 percent, to $7.25 a bushel in Chicago. One bushel makes at least 2.75 gallons of ethanol.

The corn crush spread, representing gains or losses from turning a bushel of corn into ethanol and based on March contracts, was minus 20 cents, compared with minus 23 cents yesterday and minus 14 cents on Feb. 12. The amount doesn’t include revenue from the sale of dried distillers’ grains, a byproduct of ethanol production, which can be fed to livestock.

- Mario Parker in Chicago at Bloomberg.