Ethanol Rises to Highest Price Since July 2006

Source: By Mario Parker, Bloomberg • Posted: Monday, March 31, 2014

Photographer: Daniel Acker/Bloomberg

Ethanol rose to the highest price since July 2006 as demand for the biofuel climbed while rail congestion held down production rates.

Futures surged 7.8 percent. Distillers are being forced to dial back output because of the availability of trains to transport corn to turn into the biofuel. The same delays are affecting the shipment of ethanol to the population-dense East Coast from the corn-rich Midwest, where about 89 percent of plants are located.

“It is logistics, logistics, logistics,” said Julie Ward, an assistant vice president at R.J. O’Brien & Associates, a broker in Des Moines, Iowa. “It all boils down to that. The further you have to carry it, the harder it is to get there.”

Denatured ethanol for April delivery gained 23.5 cents to $3.252 a gallon on the Chicago Board of Trade, the highest settlement since July 11, 2006. It was the biggest jump since Oct. 8, 2010. Futures have risen 33 percent in the past year. Volume was 15 percent above the 100-day average at 2:07 p.m.

A 2007 U.S. law requires the biofuel, mostly made from corn, to be blended into gasoline, so higher ethanol costs can boost retail prices for the motor fuel. Regular gasoline at U.S. pumps, averaged nationwide, reached $3.537 a gallon yesterday, the most since Sept. 12, according to Heathrow, Florida-based AAA, the nation’s largest motoring group.

Ethanol companies haven’t been able to increase production to meet higher consumption because they can’t get tank cars quickly enough, Ward said. Demand combined with severe winter weather have limited rail transport. The biofuel shortfall might last through April as plants go offline for routine maintenance before the U.S. summer driving season, she said.

Spot ethanol in New York Harbor climbed 12 cents to $4.10 a gallon, up 60 percent from a year ago, according to data compiled by Bloomberg.