The benchmark Argo ethanol market reached its highest premium over the Rule 11 rail market July 9 amid supply tightness in the Chicago area.
S&P Global Platts assessed Argo ethanol at $1.60/gal July 9, down from $1.6060/gal the previous day, and the Rule 11 market at $1.53/gal. The 7-cent spread was the widest since late November, 2019.
"If you buy Rule 11, it might be Sunday before it leaves the barn," said one source. "Actually, you might only get the bill of lading on Sunday and it might leave Tuesday of next week. With Argo it's right there."
Though shippers cannot move barges downriver from Kinder Morgan's Argo, Illinois, terminal due to lock maintenance on the Illinois River, the hub remains a key source of supply for local demand.
Buyers in the Argo market can pick the date the ethanol transfers, giving more confidence about when the product will be available, but they are having to pay a premium for that option.
Rule 11 rail cars, on the other hand, can take varying amounts of time to arrive depending on the origin and railroad performance.
Broad tightness across the US has persisted as producers balanced meeting climbing demand with keeping output dialed in at sustainable levels in case fuel demand falls.
Increasing COVID-19 cases across the US have threatened to cut into transportation fuel demand if areas return to lockdowns.
