U.S. ethanol production fell 0.9 percent to 900,000 barrels a day, according to the Energy Department.
Stockpiles swelled 3.6 percent to 19.6 million barrels, the highest level since July 16, the department reported on Feb 11 in Washington.
Production of conventional gasoline blended with ethanol fell 0.6 percent to 4.66 million barrels a day. Refiners receive a 45-cent tax credit for every gallon of ethanol blended into the motor fuel.
Denatured ethanol for February delivery soared 5.7 cents, or 2.4 percent, to $2.444 a gallon at 10:34 a.m. New York time on the Chicago Board of Trade, the highest price since July 31, 2008.
Average ethanol mills in Iowa and Illinois are losing 9 cents on every gallon produced on a spot basis, according to Ag Trader Talk, an online grains information service in Clive, Iowa.