Ethanol soars with 81% gain

Ethanol  (CBOT:ZKJ14) gained for a third day and posted the highest quarterly increase on record as producers sought ways to get the biofuel to market.

Futures climbed 6.4 percent. Prices have increased as ethanol companies reduced output because of a scarcity of trains in the Midwest, where about 89 percent of plants are located.

“You’ve got producers going into the truck market just to get gallons to the market,” said Mark Ruyack, a manager at StarFuels Inc., a Jupiter, Florida-based brokerage. “We’re at some new pricing levels. It’s just crazy.”

Denatured ethanol for April delivery rose 20.7 cents to $3.459 a gallon on the Chicago Board of Trade, the highest settlement since July 11, 2006. Prices advanced 81 percent this quarter, the most since 2005 in data compiled by Bloomberg. It bested the top performer, coffee, of the 24 commodities on the Standard & Poor’s GSCI Index.

Cold, snow and competition for rail cars have cut into train traffic, prompting distillers to reduce production. A 2007 U.S. law requires ethanol, mostly made from corn, to be blended into gasoline, so higher costs for the biofuel may boost prices at filling stations.

“Rail is still going to be an issue,” Ruyack said. “There’s a lot of rail problems and that will be caked into the market for a while.”

Gasoline for April delivery fell 2.65 cents, or 0.9 percent, to $2.911 a gallon on the New York Mercantile Exchange. The futures cover reformulated gasoline, made to be blended with ethanol before delivery to filling stations.

Ethanol’s premium to the motor fuel expanded to 54.8 cents from 31.45 cents on March 28. The additive traded at a discount to the motor fuel for the past two years, until March 21.

In cash trading, ethanol rose 7.5 cents to $4.175 a gallon in New York, 5 cents to $3.85 in Chicago, 14 cents to $4.125 on the Gulf Coast and 5.5 cents to $4.005 a gallon on the West Coast, data compiled by Bloomberg show.

 

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