Ethanol output edges up, highest since June

Wed Oct 26, 2011 2:45pm EDT

(Reuters) - U.S. ethanol production rose slightly last week as corn harvest produced fresh supplies of the key ingredient for the fuel on good blender demand.

The Energy Information Administration reported Wednesday that U.S. ethanol production totaled 909,000 barrels per day in the seven days to October 21, up 1,000 barrels per day from the previous week.

That is the highest output since the week ending June 3.

"Ethanol production has returned to more normal levels," said Linn Group analyst Jerrod Kitt.

Output plants have been "refreshed by corn flowing in from the farmers," Kitt said.

Good blender demand was noted ahead of the expiration of a blender's tax credit of 45 cents a gallon. The credit expires

December 31 of this year.

Strong margins also added incentives for greater production, and margins are seen remaining healthy until the end of this year at least, though they are expected to narrow after the fourth quarter, analysts said.

Stocks rose 1.4 percent to 17.3 million barrels over the last week, the second-straight rise, the EIA said.

Ethanol futures on the Chicago Board of Trade were trading mostly steady on Wednesday, with the spot month unchanged at $2.697 per gallon.

(Reporting by Carey Gillam in Kansas City;editing by Sofina Mirza-Reid)