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US ethanol production at 2013 high as crush spread widens

Highlights

US ethanol production climbed 2.5% in the week ending November 22 to927,000 b/d, matching the highest level so far this year, as makers of thebiofuel boost output on cheaper corn costs, data from the Energy InformationAdministration show.

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Production was lifted by a widening spread between the cost of corn, thechief feedstock in the manufacturing of ethanol in the US, and the finalselling price of the biofuel in Chicago, home to the country's most activespot market for the gasoline oxygenate.

The so-called crush spread, an indication of how profitable it is to turna bushel of corn into ethanol, rose to $1.4/gal on November 22 from $0.63/galon the previous week, according to Platts data.

The crush spread fell to $0.91/gal on November 27, but remained above theaverage recorded so far in November of $0.62/gal.

The crush spread is calculated by using daily Platts assessments for spotethanol in Chicago and CBOT front-month corn futures at 1415 Houston time. Onebushel of corn can produce 2.8 gallons of ethanol, according to Iowa StateUniversity.

The overall profitability of an ethanol plant is also influenced byvariances in the price of co-products such as high-protein animal feed, alsoknown as DDG, and the cost of energy, primarily natural gas.

Ethanol prices in Chicago remained supported by near record-lowinventories. A recent lack of suitable railcars following the implementationof new safety regulations has meant stocks were not replenished despite asurge in production rates.

Earlier this month, the Association of American Railroads urged the USDepartment of Transportation to press for improved federal tank carregulations by requiring all railcars used to transport flammable liquids tobe retrofitted or phased out, and new cars built to more stringent standards.

The EIA said US-wide ethanol supplies fell 0.4% to 15 million barrels inthe last reporting week, only 61,000 barrels above an all-time low set onOctober 25.

In the Midwest region, where most ethanol plant are, ethanol stockpilesslid 0.5% to 5.194 million barrels, or 28,000 barrels lower compared with theprevious week.

--Guilherme Kfouri, guilherme.kfouri@platts.com

--Edited by Jonathan Fox, jonathan.fox@platts.com

Similar stories appear in Biofuelscan See more information at http://www.platts.com/Products/biofuelscan