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Argo ethanol reaches highest level in more than two years

Houston — S&P Global Platts benchmark Chicago Argo ethanol assessment reached its highest level in more than two years Friday as feedstock prices continued to exert upward pressure on prices of the biofuel.

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Platts assessed Chicago Argo ethanol at $1.6075/gal, the highest level since reaching $1.6080/gal on April 25, 2017. Argo ethanol prices rose 13.6 cents on the week, and have risen 28.7 cents since May 15.

The extended rally has been powered by a surge in feedstock corn prices. Heavy, persistent rain has delayed corn planting in much of the US Midwest. Recent forecasts predicting more rains in the short-term mean that farmers may have to forego planting some of their acreage for good during the current crop year. In turn, the corn market has risen in response to worries about potential corn shortages.

Front-month CBOT futures contracts for corn, the primary feedstock for ethanol in the US, have risen 92.5 cents/bushel since May 14. On Friday, the front-month corn contract rose 11 cents to settle at $4.53/bu, the highest level since reaching $4.5625/bu on June 4, 2014.

The rally in corn prices also has whittled down ethanol crush margins. The crush margin, which indicates how much ethanol sells for against its production costs -- fell below zero on May 16, shortly after the spike corn prices began.

The margin dipped as low as minus 4.88 cents/gal in late May as ethanol prices struggled to keep up with higher corn prices. It has since risen, but remains below zero. On Friday, the crush margin was minus 1.04 cents/gal.

-- Wesley Swift, wesley.swift@spglobal.com

-- Edited by Richard Rubin, newsdesk@spglobal.com