December 14th, 2012

Ethanol Futures – Ethanol’s discount to gasoline expanded to the widest level in three weeks as the motor fuel advanced on renewed economic optimism.

The fuels gained as Federal Reserve data showed U.S. industrial production rose in November by the most in two years and after a preliminary purchasing managers’ index said China’s manufacturing is expanding at a faster pace this month. The Energy Department said Dec. 12 that ethanol stockpiles were at the highest level since June 29.

“We’re up a little bit,” said Jim Damask, a manager at BiofuelsConnect, a Jupiter, Florida-based alternative energy broker. “There certainly is a lot of supply. People aren’t grabbing it up as fast as you would want.”

Ethanol’s discount to gasoline increased to 36.41 cents a gallon from 31.21 cents yesterday, the widest spread since Nov. 21, based on futures settlement prices. The differential has averaged 61.29 cents this year.

Denatured ethanol for January delivery added 0.8 cents, or 0.3 percent, to $2.298 a gallon on the Chicago Board of Trade, snapping the longest streak of declines since the period ended July 26. The futures have climbed 4.3 percent this year.

Ethanol inventories last week rose 3.6 percent to 20 million barrels, while production declined 1.3 percent to 824,000 barrels a day, the Energy Department said. Imports of the fuel in the week ended Dec. 7 sank to 12,000 barrels a day from 92,000 barrels the previous week.

Ethanol: Brazilian Prices

Ethanol on the Brazilian spot market is fetching $2.06 a gallon, data compiled by Bloomberg show.

In cash market trading, ethanol in New York declined 2.5 cents, or 1 percent, to $2.37 a gallon and in the U.S. Gulf the biofuel fell 1 cent to $2.35, data compiled by Bloomberg show.

Ethanol futures in Chicago slipped 0.5 cent to $2.285 a gallon and on the West Coast the additive rose 4.5 cents, or 1.9 percent, to $2.46.

Gasoline futures for January delivery advanced 6 cents, or 2.3 percent, to settle at $2.6621 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 futures for March delivery jumped 10.5 cents, or 1.5 percent, to $7.3075 a bushel in Chicago. One bushel makes at least 2.75 gallons of ethanol.

Based on March contracts for corn and ethanol, producers are losing 34 cents on each gallon of the fuel made, up from 31 cents yesterday, 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, according to data collected by Bloomberg.

- Mario Parker in Chicago at Bloomberg.