Ethanol Futures Surge Most in Five Years on Lower Corn Yields

Bloomberg
By Mario Parker - Oct 8, 2010 3:28 PM CT

Ethanol futures surged the most in more than five years in Chicago after a government report forecast corn supplies will be lower than an earlier estimate, signaling higher costs for plants that make the biofuel.

Futures climbed after the U.S. Agriculture Department estimated the domestic corn crop will fall 3.4 percent from a year earlier, the second reduction to its forecast in as many months. The grain is the primary ingredient used to make ethanol in the U.S.

“The big story is a very bullish grain report,” said Dan Flynn, a trader at PFG Best in Chicago. “The profit margin to make ethanol is going to go up because it costs more to make it.”

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