HOUSTON — Corn prices have fallen 40 percent in 2013, a drop that inspired refineries to blend a record amount of ethanol into gasoline in August.
The price drop came as the government projected record corn production of 14 billion bushels this year, despite persistent drought conditions in some regions, according to the U.S. Energy Information Administration.
The U.S. Department of Agriculture also projected record corn production of 14.8 billion bushels in 2012, but the final tally came in at only 10.8 billion bushels because of drought.
Snow and rainfall across much of the country have improved results so far this year, and the increased supply of corn has cut cut costs for ethanol production.
Corn prices have dropped from $7.50 per bushel in January to $4.50 per bushel in November, the Energy Information Administration said.
“A $3 reduction in the price of a bushel of corn translates into a roughly $1.08 reduction in the cost of ethanol production,” the agency said in a blog post. “While ethanol prices have also declined, ethanol producer margins have risen above $0.50 per gallon in recent months.”
The lower costs have made ethanol more attractive for fuel blending, with refineries using an all-time high of 884,000 barrels of ethanol per day in August, the agency said.
While the oil industry has argued against mandates requiring that fuel makers blend ethanol into gasoline, the corn-based fuel can sometimes lower refining costs.