US weekly ethanol margins up on softer corn prices

* USDA said farmers to harvest 2nd largest corn crop

* Weak motor fuel demand to keep a cap on margins

NEW YORK, July 10 (Reuters) - Average U.S. ethanol margins have risen for the fourth week running as prices for corn, the top raw material cost for distillers, have fallen more than $1 a bushel over the month, experts said.

"The lower price of corn has really helped the economics of the ethanol industry," said Rick Kment, an ethanol expert at DTN in Nebraska.

The ethanol crush spread for average ethanol producers rose about 10 cents to 50 cents a gallon this week, using the formula of the Midwest ethanol price, minus the corn price divided by 2.8.

Operating costs such as natural gas and overhead trim the crush spread by about 20 to 30 cents per gallon, depending on the distillery, bringing net margins to between 20 and 30 cents a gallon this week.

The July corn contract CN9 on the Chicago Board of Trade closed at $3.43-1/2 a bushel on Thursday, down more than $1 from prices in early June.

Prices could keep falling. The U.S. Department of Agriculture on Friday said farmers will harvest their second-largest corn crop ever, which will make for "sharply lower summer price prospects for corn." [ID:nN10308720].

The recession continues to hit fuel demand, however, which could cut the amount of corn used to make ethanol for this marketing year by 100 million bushels, to 3.65 billion bushels, the USDA forecast.