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R11 rail premium to physical US ethanol at 14-month high

The US ethanol rail market has moved to its highest premium to the physical Chicago Argo terminal value in over a year as challenging logistics make it difficult to move ethanol, sources said Tuesday.

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S&P Global Platts assessed the R11 rail market at $1.2750/gal Monday, a 3.75 cents/gal premium to the benchmark Chicago Argo ethanol assessment of $1.2375/gal, the highest premium since November 2, 2016, when it was assessed at 5.05 cents/gal over Chicago Argo.

R11 was heard trading at $1.29/gal Tuesday morning for this-week shipment.

One of the main reasons behind the rising premiums was difficulty moving ethanol out of the Chicago area, according to sources, which has put downward pressure on prices for that region.



"The river has been frozen, so even though the levels are attractive it's hard to move the barrels out," a market source said.

The Illinois River has been frozen due to the very cold conditions, with barge traffic almost stopped, according to market reports.

No barge freight rates for January have been heard in the market.

The Chicago Argo market was assessed at a 6.25 cents/gal discount to the February Chicago swap, highlighting the prompt weakness in the market.

The February/March swap structure was also assessed 4 cents/gal contango Monday, the widest front-month/second-month contango structure assessed by Platts since February 25, 2015. The January/February structure was heard bid at minus 4.25 cents/gal Tuesday.

The US rail market has also suffered some delays due the cold weather and snow across the US that has helped strengthen regional premiums.

The January New York Harbor market reached 15.2 cents/gal above the physical Argo ethanol value at the end of last week, the largest premium since January 3, 2017, when it was 17.25 cents/gal.

The January New York Harbor barge market premium to the January Chicago paper market has been holding relatively steady, assessed at a 12.75 cents/gal premium.

--Sophie Byron, sophie.byron@spglobal.com

--Edited by Jason Lindquist, jason.lindquist@spglobal.com