Ethanol Boost and Export Order, Fuel Corn Price Rise

A jump in ethanol production to the highest in 11 month, coupled with a rash of buying by feed users, spurred a jump in corn prices on Wednesday, which lifted prices of other crops too.

Corn for July delivery hit $6.57 a bushel at one point, a rise of 2.7%, after official data showed US ethanol production soaring 18,000 barrels a day to 875,000 barrels a day last week, the highest figure since June last year.

Data on inventories showed demand for the biofuel too, with stocks falling by 247,000 barrels to 16.18m barrels, the lowest since November 2010, and in fact within 150,000 barrels of setting the lowest on record.

The extent of the rise in production was seen as down to improved production margins, given the lower corn prices that have prevailed since the US in late March revealed that its inventories of the grain were far higher than had been thought.

A strong pace of new crop plantings, in boosting production ideas, depressed corn values over the past week.

 

Large export deals

The ethanol data extended a rally in corn prices fuelled by the US Department of Agriculture’s announcement of 540,000 tonnes of corn export sales, for the 2013-14 marketing year.

Of the total, 360,000 tonnes were bought by China, a sensitive market, given the extent of its demand, which is spurring ideas that it has turned into a growing and structural importer of the grain.

Furthermore, feed buyers were also believed to have stepped in to buy at prices among their lowest since June, and with the potential for a late harvest, after delayed sowings, elongating reliance on thin corn supplies left over from the drought-hit 2012 harvest.

“The ethanol guys, with their improved margins, have been taking corn away from the feed guys, who have had no alternative but to come back in and buy corn,” Roy Huckabay, vice-president at Linn Group, the Chicago broker, told Agrimoney.com.

 

Flex fuel factor?

Mr Huckabay added that the ethanol data had also exposed an apparent anomaly, with ethanol usage appearing far higher than comparison of stocks, production and trade data would suggest.

The solution appeared to lie in the growing popularity of so-called E8, ethanol mixed 85% with gasoline, is used by so-called flex fuel cars which allow users to alternative between the biofuel nad conventional fuel.

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