US Q1 ethanol output seen up 37 pct on new plants

NEW YORK, April 4 (Reuters) - A fleet of new distilleries boosted U.S. ethanol production during the first three months of 2008 nearly 37 percent from a year earlier to 1.9 billion gallons, an industry watcher said on Friday.

Average daily production of the alternative motor fuel was about 21.4 million gallons per day during the first quarter of the year, up from an average of 15.6 million gpd in the same period of 2007, according to Denver-based Bentek Energy, LLC.

"If this trend continues, 2008 will be another record-setting year for U.S. ethanol production," said Jack Weixel, a Bentek senior analyst.

U.S. ethanol output has risen as the government gives the industry generous incentives in an effort to begin to wean the country off foreign oil. Washington also puts a 54-cents-per-gallon tariff on ethanol imported from Brazil, which vies with the United States for position as the world's largest ethanol producer.

Late last year, the United States mandated the blending of 36 billion gallons per year of alternative fuels like ethanol and biodiesel into gasoline by 2022. Currently, most ethanol is blended into E10 gasoline, or fuel that has about 10 percent ethanol. It would take more than 12 billion gallons to make the entire U.S. gasoline pool E10.

E85, or fuel that is 85 percent ethanol, is also sold in Minnesota and a few other states.

The United States has nearly 150 ethanol plants, up from less than 70 plants five years ago. Total U.S. capacity has topped 8.5 billion gallons per year. Please click [ID:nN03528314].

This year expansions and new plants scheduled to go online could push total U.S. ethanol production to over 7.7 billion gallons if output gains seen like those seen in the first quarter continue, Bentek said. Total production of ethanol was approximately 6.5 billion gallons in 2007.

Average ethanol producers may find it hard to keep earning strong profits despite the industry's growth. Weak margins for distilling U.S. ethanol have prompted several shutdowns and delays in building new distilleries in recent months, though the number of plants in the overall fleet has risen.