Ethanol’s discount to gasoline expands amid ample corn supplies

Ethanol’s discount to gasoline widened as distillers accelerated production amid ample supplies of corn, the biofuel’s feedstock.

The spread between the December contracts expanded 0.99 cent to 89.61 cents a gallon. The corn harvest in the U.S. is 73% complete as of Oct. 27, compared with 59% a week ago, the Agriculture Department reported yesterday.

“Harvest is doing quite well,” Renan Pimenta, a Campinas, Brazil-based analyst for Intl FCStone Inc., said in a telephone interview. “Distillers are stepping up, maximizing production.”

Denatured ethanol for December delivery slipped 2.2 cents, or 1.3%, to settle at $1.620 a gallon on the Chicago Board of Trade. The November contract, which expired today, fell 0.2 cent to $1.70 a gallon.

December gasoline dropped 1.21 cents, or 0.5%, to $2.5161 a gallon at the close of trading on the New York Mercantile Exchange. The contract covers reformulated gasoline, made to be blended with ethanol before delivery to filling stations.

The U.S. corn crop may be a record 14.03 billion bushels, according to a Bloomberg survey of 36 analysts. The USDA is scheduled to release its forecast for the crop on Nov. 8.

The corn crush spread, or the difference between the cost of corn and the price of ethanol, based on December contracts, was 8 cents a gallon, down from 9 cents yesterday, data compiled by Bloomberg show.

Corn Falls

Corn for December delivery declined 1.25 cents, or 0.3%, to settle at $4.25 a bushel in Chicago. Prices have dropped 39% this year, the worst performance among the 24 raw materials in Standard & Poor’s GSCI Spot Index.

The Environmental Protection Agency tracks compliance with the federal ethanol-use mandate with Renewable Identification Numbers, or RINs, tradable certificates that are attached to each gallon of biofuel.

Corn-based RINs gained 2.5 cents to 27.5 cents, the highest since Oct. 22. Advanced RINs, which cover biodiesel and Brazilian sugarcane-based ethanol, advanced 2 cents to 34 cents, data compiled by Bloomberg show.

U.S. ethanol has dropped 22% this year, and that means exports will continue to rise, FCStone’s Pimenta said.

Shipments soared to a five-month high of 1.19 million barrels (49.98 million gallons) in August, the latest data available, according to the Energy Information Administration. Canada accounted for 66% of shipments, the EIA said.

In cash market trading, ethanol sank 1.5 cents to $2.02 a gallon in New York, 2.5 cents to $1.725 in Chicago and 1.5 cents to $1.815 on the Gulf Coast, data compiled by Bloomberg show. Prices in the West Coast gained 5 cents to $1.89 a gallon.

The Gulf’s discount to the West Coast widened 6.5 cents to 7.5 cents, while Chicago’s discount to New York expanded by 1 cent to 29.5 cents.

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