Ethanol increased the most since March as corn used to make the fuel rose to the highest level since November.

Bloomberg  • Posted: Tuesday, June 26, 2012

The biofuel gained as the most-active December corn contract surged on forecasts that dry weather will continue to the end of June for most of the Midwest, reducing yields and raising the cost of ethanol production.

About 32 percent of the domestic corn crop is under stress, and temperatures will rise as the plants begin to pollinate, Chicago-based T-Storm Weather LLC said in a report. At least 50 percent of subsoil has been rated below normal since May 31, the forecaster said.

Producers are losing 10 cents on every gallon of ethanol made, according to data compiled by Bloomberg.

Denatured ethanol for July delivery rose 9.4 cents, or 4.5 percent, to $2.164 a gallon on the Chicago Board of Trade.

Corn climbed the exchange limit of 40 cents, or 7.2 percent, to $5.94 a bushel on the Chicago Board of Trade. It was the biggest advance in corn futures since June 30, 2010.

In cash market trading, ethanol in the U.S. Gulf rose 5.5 cents to $2.18 a gallon, and, on the West Coast, the biofuel added 6.5 cents, to $2.225, according to data compiled by Bloomberg.