The US ethanol crush margin continued to rise Thursday after reaching a nearly two-year high of 46.73 cents/gal Wednesday.
The margin has not been as high since December 12, 2014, when it was 63.43 cents/gal.
Chicago Argo, a benchmark for physical US ethanol, was heard trading for $1.66/gal Thursday morning, while the front-month CBOT corn futures contract traded for $3.3275/bushel, yielding a margin of 47.16 cents/gal.
A simple crush margin can be calculated by dividing the cost of corn per bushel by 2.8, the number of gallons of ethanol that a bushel of corn can produce. The resulting number is the cost of corn per gallon of ethanol.
The margin strengthened sharply on Wednesday, climbing 4.75 cents from Tuesday, as ethanol rallied on bullish weekly data from the US Energy Information Administration.
Market participants had expected production to climb above 1.020 million b/d, but the data showed run rates fell 2,000 b/d to 1.012 million b/d. The longer production can hover below maximum capacity, the more time stocks have to draw before the typical build in the first quarter.
Stocks also supported prices as they fell 504,000 barrels to more than a one-year low. "No one expected that big of a draw," said one source. Strong exports have kept demand for US ethanol high.
