The U.S. Department of Agriculture lowered the forecast for corn expected to be used for ethanol this marketing year in the latest report out on Friday.

Corn for ethanol use in 2008-2009 was lowered by 100 million bushels in USDA’s July World Agricultural Supply and Demand report, to 3.65 billion – which is still up more than 600 million bushels from last year and about 500 million less than they are forecasting for next year.

USDA Chief Economist Joe Glauber says the financial situation for ethanol producers is better than it was earlier this year. “We have seen positive margins come back for the ethanol industry, particularly with the lower prices for corn and higher prices for gasoline, those margins have come back very strong,” he said. “But, if we look at ethanol production and gasoline consumption in the U.S., both those have been off a bit.” Which means reduced production of gasoline blends with ethanol in May and June, based on the most recent weekly data.

The prediction for next marketing year is that ethanol production will use 4.1 million bushels of corn – up almost 12 percent from this year.