U.S. ethanol profits stay weak on poor fuel demand

NEW YORK, Oct 10 (Reuters) - Average U.S. ethanol distillers profits rose a few pennies this week on softer corn prices but remained weak overall on poor motor fuel demand, analysts said on Friday.

"Those companies that are able to keep costs under control continue to do okay. Those that can't are in a world of hurt," said Rick Kment, analyst at DTN in Nebraska.

Average U.S. distillers were making about 10 to 20 cents per gallon for the week ending Thursday, analysts said.

That was up about five to 10 cents from the previous week, but was no relief from the range seen in recent months.

Poor profits amid volatile corn prices and soft motor fuel demand led to delays and other problems for producers this week. Aventine Renewable Energy Holdings Inc AVR.N said this week it would delay the start-up of its Aurora West ethanol plant in Nebraska until the second quarter of next year. It had been scheduled to open in the first quarter.

In addition, Gateway Ethanol LLC, which opened a small Kansas distillery last year to make alternative motor fuel, filed for bankruptcy protection, according to court records.

Gateway said it owed between $50 million and $100 million to creditors, in a filing on Sunday in U.S. Bankruptcy Court for the District of Kansas.

Average margins should range from positive 25 cents to negative 25 cents per gallon for the next six to 12 months as shipping constraints and ample supply weigh on the business, Kment has said.

U.S. ethanol capacity has jumped 60 percent since last year to more than 11 billion gallons per year, which could keep a lid on margins until the transportation bottlenecks are eased. [ID:nN26475532].

A bright spot was weaker corn prices. December corn futures CZ8 on the Chicago Board of Trade closed at about $4.38 a bushel on Thursday, down about 16 cents from last week on economic concerns as credit tightens.

The U.S. Department of Agriculture reported on Friday that ethanol makers will use 4 billion bushels of corn, or about 100 million bushels less than its previous estimate, to make the alternative motor fuel.

Also providing some relief, prices for natural gas, which fires most distilleries, have fallen on weeks of stronger U.S. supplies. Average cash natural gas prices in the Midwestern United States NG-P-MIDC were $1.98 per million British thermal units, down about 50 cents from last week.

Ethanol prices were also weaker, however, on indications that U.S. driving demand had fallen for the ninth straight month. Miles traveled on all roads in July were down 3.6 percent year over year, the government said on Sept 30.

In the Midwest <ETHANOL/US>, spot ethanol was $1.87 a gallon, down about about 12 cents from last month.

The ethanol crush spread was about 31 cents a gallon, using the formula of the Midwest ethanol price, minus the corn price divided by 2.8. Operating costs such as natural gas prices and overhead trim the crush spread by about 10 to 20 cents per gallon. Producers that sell the animal feed dried distillers' grains can improve their margins. (Reporting by Timothy Gardner; Editing by Marguerita Choy))