Ethanol prices soared to a seven-month high after data
showed ethanol stocks tumbling some 300,000 barrels of their record low,
despite a sharp recovery in production.
Ethanol for April delivery jumped nearly 6% to $2.72 a
gallon in Chicago, the highest for a spot contract since June last year, before
easing back to $2.687 a gallon as of 12:00 local time (17:00 UK time).
The better-traded May contract was up 3.5% at $2.495 a
The gains were supercharged by data showing that US inventories
of the biofuel dropping by 631,000 barrels last week to 15.28m barrels, the lowest
since November, and down 17% year on year.
In the east coast, inventories hit a record low of 4.5m
The drop also took the decline over the past month to an
unusually high 1.93m barrels, and came despite some success by ethanol plants
in rebuilding production, which has been hampered by the impact of cold weather
'Stocks are driving
Output rose by 22,000 barrels a day last week if, at 891,000
barrels a day, remaining below levels that might be expected given solid production
"It's the stocks that are driving the trade," Roy Huckabay,
analyst with the Linn Group in Chicago, told Agrimoney.com.
"We are still having a problem with movement" of ethanol
And while producers "are running at a bigger rate, they
cannot do anything to build back inventories".
The decline comes with the prospect ahead of the so-called summer driving season,
and its increased demand on supplies of ethanol, which is made in the US mainly from corn.
Typically US ethanol inventories are at a relatively high
level at this time of year, before being run down into the autumn.
However, with production remaining relatively low, below the 930,000 barrels a day forecasts deemed necessary to meet the US Department of Agriculture estimate for corn use in making ethanol in 2013-14, the data received a cooler response in futures markets.
Corn for May was 0.8% higher at $4.90 a bushel, lagging gains of more than 3% in rival grain wheat.