U.S. ethanol margins up for 5th week as corn falls

NEW YORK (Reuters) - Average U.S. ethanol margins rose for the fifth week running as prices for corn, the top raw material cost for distillers, have fallen about 28 percent over the same time, experts said.

The average ethanol crush spread rose about 5 cents this week to 55 cents a gallon. Operating costs such as natural gas and overhead trim the crush spread by about 20 to 30 cents per gallon, bringing net margins to between 25 and 35 cents a gallon.

The recent profit gains meant that margins were still low but that many producers were making more money than they had in nearly a year. Still, two analysts said that weak overall demand for motor fuels should keep production from spiking.

The spot corn contract on the Chicago Board of Trade closed at $3.22-1/4 per bushel on Friday, down about 23 cents from last week and down about $1.25 from prices in early June.

Prices could still have room to fall. The U.S. Department of Agriculture last Friday said farmers will harvest their second-largest corn crop ever, which will make for “sharply lower summer price prospects for corn.”

Spot ethanol prices in the Midwest fell about 3 cents to $1.68 per gallon from last week.

The stronger margins came as a relief to the industry, which has seen a slew of shutdowns, bankruptcy filings and curtailments since late last year.

U.S. production of ethanol this year is expected to be higher than last year as mandates for biofuel blending call for increases in corn ethanol each year. The mandates call for 15 billion gallons per year of traditional ethanol to be blended into gasoline by 2015. up from 10.5 billion gallons this year.

Reporting by Timothy Gardner; Editing by Lisa Shumaker