New York Harbor Ethanol Premium to Argo at Four-month High

The spread between New York Harbor, the busiest trading hub on the East Coast, and the benchmark Argo market remained at a four-month high Friday as prices in Argo have weakened in recent days.

New York Harbor was at a 12.75-cent premium to Argo Thursday and Friday, the highest since January.

High premiums in New York Harbor have encouraged buyers in that market to bid higher to attract rail cars into that market.

Rail markets across the US have been at a high premium during seasonal maintenance. That has dried up supply for New York Harbor and driven premiums higher.

"It's the normal spread of locations: Texas, Rule 11 and delivered locations," said a market participant Friday.

Houston is the most common origin for exports out of the US, so market participants striving to meet export demand have captured much of the available rail market.

Producer selling in the Argo market has weighed on that market, driving up the premiums in rail markets.

Even though there is product available in Chicago, moving ethanol from Kinder Morgan's terminal in Argo, Illinois, to rail cars is not logistically easy and can cost too much to capture currently-high spreads.

"A lot of guys are confused and gun shy," said another source about currently low levels in Chicago compared with premiums elsewhere.