Ethanol rack prices took a substantial dive. All tracked spot locations fell by at least 7¢, with the Gulf Coast drop-off less dramatic but East and West coastal markets even weaker. Early in the week, dealers reported that they were still seeing strong buying activity at terminal locations, prodded by record corn and oil prices, but by Thursday ethanol prices had fallen 3.6% – in a marked separation from both historical anchors.

        The market has already been factoring in reduced corn production, a market source said, but prices could re-align after traders digest Tuesday's USDA Prospective Plantings report.

        Much of the decline in overall prices stemmed from a fall in Midwest racks, which were about 9 to 11¢ a gallon lower on the week to about $2.38 to $2.39 a gallon.

        The national average declined 9¢ to $2.43 a gallon, or 3.6%, according to data tracked by Ethanol & Biodiesel News, putting prices at near-March levels.

        There was renewed speculation from observers that blending was inching closer to saturation, including a note from Antoine Halff, an analyst at brokerage firm Newedge.

        Ethanol producers are bracing for record-high feedstock prices after July corn surged to a new trading record of $6.6725/bushel Monday on the Chicago Board of Trade.

        Heavy rains, severe winds, and tornadoes throughout the Midwest have propelled corn futures to their third straight record session.

        Meantime, the U.S. Department of Agriculture said Tuesday it expects the 2008/09 marketing-year average farm price for corn at 30¢ higher on both ends of the range, at $5.30 to $6.30 per bushel.

        Farmers are experiencing the worst weather they have seen since 1993, when U.S. crops suffered from weeks of rain that eventually led to the severe flooding of the Mississippi river.

        On top of that, this season's U.S. corn crop was planted late because of heavy rain and emerged from the ground later than in past years, which could lead to mid-summer heat damage and lower yields.

        Both ethanol and biodiesel producers perked up when the CEO of Monsanto, the leading producer of genetically engineered seed, pledged last week to develop seeds that would double the yields of corn and soybeans and cut water, land and energy requirements by 30% worldwide.

        Chief Executive Hugh Grant announced the initiative during a company meeting, indicating that the company's research and development team has been developing crops that are increasingly resistant to drought and pests.

        “If we succeed in doubling yields, it absolutely changes the opportunity for food availability,” Grant said, referring to rising food prices and growing food shortages that led to last week's U.N. summit meeting in Rome.

        “We believe that it’s possible to double corn yields in the United States by 2030 to 300 bushels per acre,” said Brett D. Begemann, Executive VP at St. Louis, MO.-based Monsanto at a Merrill Lynch analyst conference on Wednesday.

        Monsanto, whose development of genetically engineered seeds has often made it a target of controversy, said it made the commitment after consulting farmers, political leaders, academics and advocacy groups as to what’s needed to be done to increase food production in an environmentally conscious manner.