US weekly ethanol margins rise to above break even

NEW YORK, Feb 13 (Reuters) - Average U.S. ethanol distiller profits returned to slightly above break even this week as prices for corn, the main input cost for producers, fell on worries about the economy.

March corn CH9 closed at about $3.66 a bushel on Thursday, down about 5 cents from last week and down 16 cents from two weeks earlier.

"The reduction in corn cost ... helped to slightly improve margins," ethanol expert Rick Kment at DTN in Nebraska said.

Spot ethanol prices <ETHANOL/US> rose about 3 cents to $1.60 per gallon in the Midwest market, which also helped profits rise a few pennies, dealers said.

The ethanol crush spread rose about 5 cents to 29 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 20 to 30 cents per gallon, bringing net margins to about +5 cents a gallon.

Ethanol makers have been suffering negative or low margins for months on weak fuel demand, particularly as ethanol prices have traded well above gasoline prices, which discourages oil refiner demand for the renewable fuel.

Some 21 percent of U.S. ethanol capacity has been idled since peaking sometime last last year, according to Archer Daniels Midland (ADM.N: Quote, Profile, Research). Please click on [ID:nN03510125].

Many producers make the livestock feed distillers grains as a byproduct of making ethanol, which can improve profits. Producers near feedlots can sell wet distillers grains, which are cheaper to make. Ethanol plants that are farther from feedlots sell dried distillers grains, but have to spend money on natural gas to dry them.