US ethanol margins up as Brazil imports wane -CS

WASHINGTON, Oct 28 (Reuters) - Profits for making U.S. ethanol have risen amid a drop in imports of the alternative motor fuel from Brazil, a Credit Suisse report said.

Average cash margins for making ethanol rose to about 25 cents per gallon in October, up from about 15 cents in September, and about five cents in August, Credit Suisse said.

Average distillers were losing money until July.

More of Brazil's sugar cane is being processed into sugar as prices for that commodity hit a 28-1/2-year high, leaving less of the crop for ethanol. Credit Suisse said that as of late last month Brazilian ethanol production was down about 3 percent year-on-year as more of the crop went to make sugar.

In addition, only about 11.9 billion gallons per year out of 13.1 billion gallons of U.S. ethanol capacity was online. "U.S. domestic ethanol production volumes have been relatively low in 2009 due to poor margins and an extremely tight credit market," the report said.

Credit Suisse said the recovery in margins could falter at some point early next year as more U.S. ethanol plants return to service. The bank expects natural gas prices to increase next year from $4.09 million cubic feet in 2009 to $5.75 million cubic feet in 2010 which could also dampen ethanol margins because most distilleries burn the fuel. (Reporting by Timothy Gardner; Editing by Christian Wiessner)