US ethanol output rebounded faster than had been expected to a two-month high, boosted by margin improvement and a return of capacity online, and underpinning ideas of firm domestic corn demand.
US biofuel plants, which use corn as a feedstock, produced an average of 825,000 barrels a day of ethanol last week, the strongest figure since August, data from US Energy Information Administration said.
The figure represented a 3.0% rise week on week, the fastest rate of growth since April, and ahead of the pace expected by many observers.
At Linn Group, Jerrod Kitt said that he had expected some increase, given that "you do get rebounds in production at this time of year, as autumn scheduled maintenance starts to ebb away".
However, he had forecast only a 1% rise in output.
'It's not gangbusters'
The extent of the recovery was down "a lot to improved performance", with moves in corn and ethanol prices meaning plants were running with margins "which are now pink instead of red", Mr Kitt said.
"Margins are better, but it's not gangbusters," with plants even in the Midwest, where the relatively rich supply of corn keeps costs relatively low, still losing some 5-10 cents a gallon, including the likes of fixed costs.
"It's still not a great industry to be in."
Volumes were still some 10% below year ago levels, and expected to show a similar decline for the rest of the calendar year.
Slump and recovery
The recovery was particularly fast in plants outside the Midwest, which account for the minority of capacity, where output rebounded by 12.8% - recovering from a 20% slump the week before, and suggesting one-time issues may have been involved.
Ironically, this followed a reannouncement by Bunge this week that it is to close one of these outlying sites, in Mississippi, by November 30 because of poor margins.
So-called "destination plants", sited in areas outside the main corn-producing regions, often suffer lower margins, given the extra cost of transporting grain in – if they can get hold of sufficient quantities at all at times, as now, when supplies are squeezed.
The data - which imply US corn consumption by ethanol plants back on track to meet US Department of Agriculture projections for 2012-13 – come amid revived debate over domestic demand for the grain, which has underpinned prices.
Chicago futures had, as of last night's close, risen 3% so far this week.
"Corn consumption is clearly slowing, but the pace may not yet be sufficiently slow to ration the available supplies," by Darrel Good, agribusiness economist at the University of Illinois, said.
"This suggests that, while higher prices are not likely needed, current price levels will be maintained a while longer."
However, futures were on Wednesday undermined by data showing strong Brazilian shipments of the grain last month, weakening expectations of the country losing its competitiveness on export markets.
Chicago's December contract stood 0.2% lower at $7.54 ¼ a bushel with an hour's trading to go.