Ethanol tumbles 7 pct on near-record U.S. production

Source: BY MICHAEL HIRTZER, Reuters • Posted: Thursday, November 20, 2014

Nov 19 (Reuters) – U.S. ethanol futures tumbled more than 7 percent on Wednesday after the Energy Information Administration pegged production of the grain-based biofuel last week at the second highest level on record.

The EIA said ethanol production in the week ending Nov. 14 averaged 970,000 barrels per day, the highest rate since the record production of 972,000 bpd in the week of June 13.

Biofuel makers have ramped up operations three weeks in a row amid plentiful supplies of corn in the wake of a record-large harvest. Comparatively low corn and high ethanol prices resulted in the best profit margins in months for ethanol producers such as Archer Daniels Midland Co and Green Plains Inc.

 “Everybody thought you were going to get a production response out of that (the high profit margins), and here it is,” said Jerrod Kitt, broker at the Linn Group in Chicago.

Ethanol futures for December delivery fell nearly 15 cents to $1.92 per gallon, with the percentage decline the largest in the life of the contract.

However, slow U.S. rail transportation is keeping biofuel prices elevated for blenders and exporters located near U.S. Coasts – far away from most ethanol plants in the Midwestern crop belt. Prices for New York Harbor ethanol of $2.43 per gallon were the highest since May as of Friday, the most recently available data.

Stocks of ethanol also declined last week by 370,000 barrels to 17.34 million barrels, indicating good demand, EIA data showed. “There’s still a sense that prompt supply is tight,” Kitt added