EIA: Ethanol spot prices rise on rail congestion, cold weather

Spot prices for ethanol have increased steadily since early February, driven by logistical problems and harsh weather conditions, according to the US Energy Information Administration.

By late March, New York Harbor (NYH) spot ethanol prices exceeded prices for reformulated gasoline blendstock for oxygen blending (RBOB) by more than $1/gal. Ethanol spot prices in Chicago and Gulf Coast markets also rose above NYH RBOB prices.

The premium of NYH over Chicago spot ethanol prices also widened to $1/gal in early March from ¢25/gal in January, reflecting logistical constraints in the Midwest ethanol production centers, mainly involving railroads on which 70% of ethanol is shipped.

“Railcar dwell time, the time that loaded railcars spend in a terminal awaiting movement at Burlington Northern Santa Fe Corp.’s Galesburg, Ill., terminal, which handles many ethanol cars from Iowa, nearly doubled in early 2014 to reach a peak of 60 hr in February and remain above year-ago levels,” EIA said. The agency also noted that the average speed of manifest trains (trains running multiple products), which are often used to deliver ethanol to gasoline blending terminals that are not equipped to handle unit trains, also slowed by 23% over the past 12 months.

During mid-February to mid-March, ethanol stocks were drawn down nationwide by nearly 2 million bbl, partially recovering to 15.9 million bbl on Mar. 28 but still more than 4 million bbl below typical March levels, which averaged more than 20 million bbl from 2011 through 2013. East Coast inventories were especially hard hit, and on Mar. 14 reached 4.5 million bbl, the lowest level since EIA began recording data in June 2010.

However, ethanol futures prices suggest that the recent price increase is anticipated by the market to be short-lived as rail system congestion improves and ethanol producers respond to the strong incentive that higher ethanol prices provide.

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