April 7, 2008

US ethanol profits drop on record corn prices

The average profits for US ethanol declined last week as corn prices soared to a record US$6 a bushel.

The rise of corn prices happened after the USDA released a report that US farmers would plant 8 percent less of corn this year, in favor of soy and wheat.

Ethanol margins fell about 10 cents to 15 to 25 cents per gallon from the previous week, the main US feedstock for the alternative motor fuel analysts estimated.

Cory Garcia, a research associate at Raymond James and Associates in Houston, said that although the ethanol price is doing pretty well, US$6 corn is going to keep the producers from making money.

The next major corn crop report is expected around late spring, which could keep prices for the grain high at least until then.

Garcia pointed that people are not going to get a whole lot of data for months, so there should not be much move in the corn price until next report comes out.

The May corn contract on the Chicago Board of Trade closed at US$6 on Thursday, up 45 cents in a week, supported by the USDA report on Monday.

Wet weather in the US Midwest crop belt also supported prices.

Spot ethanol prices in the Midwest were around US$2.54 a gallon over the week, up about 9 cents from last week, supported by high petroleum prices.

The ethanol crush spread fell about 11 cents to 40 cents per gallon, according to Reuters.