U.S. ethanol margins inch up on softer corn

NEW YORK, May 16 (Reuters) - Average profits for distilling U.S. ethanol rose from just above break even this week as corn prices slipped from record highs, but natural gas prices weighed on the business, analysts said.

Average ethanol margins rose about 10 cents to 15 to 25 cents per gallon as prices softened for corn, the main U.S. feedstock for the alternative motor fuel, analysts estimated.

"We're still cautious on ethanol margins, they should remain under pressure," said Ron Oster, analyst at Broadpoint Capital in Missouri. "I don't see corn prices falling too much in the future and natural gas prices, probably the number two input cost for distillers, have soared."

July CBOT corn futures CN8 closed at $5.99 a bushel on Thursday, down about 30 cents on the week on forecasts for better planting weather in the U.S. Midwest.

Spot ethanol prices in the Midwest <ETHANOL/US> were steady to a few cents higher at $2.54 a gallon, holding gains from months of stronger oil prices.

Crude oil shot to a record high near $128 a barrel after investment bank Goldman Sachs forecast a continued spike in prices through the end of the year on thin supplies.

The ethanol crush spread fell about nine cents to 40 cents per gallon, according to Reuters calculations. After conversion costs for making the fuel, including natural gas costs, ethanol producers were averaging about 15 to 25 cents per gallon in profit.

Strong prices for natural gas, which fires most ethanol distilleries, also hurt profits. Average cash natural gas prices in the Midwestern United States NG-P-MIDC were $9.28 per million British thermal units, down about 10 cents from the previous week, but up about $1 from prices in April. (Reporting by Timothy Gardner; editing by Jim Marshall)