Then it was corn's turn. As corn prices shot up over the $6.50 mark on the Chicago Board of Trade, ethanol processing margins actually turned negative. Unsubsidized gross refining revenues, which were 63.5 cents a bushel at the end of May, turned to a loss of 7.25 cents a bushel by the first weekend of June when ethanol prices slumped.

In the U.S., corn is the primary feedstock for ethanol production. The gross processing margin, or "corn crush," represents the difference between the sales proceeds of fuel ethanol and the price of its corn feedstock. One bushel of corn can be converted into about 2.75 gallons of ethanol (see "Are We At The Bottom Of The Ethanol Barrel?").

Heavy rains in the Midwest growing regions are mostly to blame for corn's breakout rise. Flooding and crop damage following the weekend's rains will likely put an end to this year's corn planting season for the upper region of the U.S. Corn Belt.

The question weighing heavy on everybody's minds is just how many corn acres got planted before the recent deluge and how corn acres were lost. Planting was already behind trend lines going into the week. With field activity further limited by weather, planting estimates for this year's crop are coming up 3 to 4 million acres short.

Corn and ethanol prices are not the only factors affecting crush margins. In the real world, other components on both the revenue side (such as subsidies and proceeds from by-product sales), and on the expense side (costs for fuels and enzymes, for example), exert some influence, but the corn crush is widely followed because it offers a thumbnail sketch of ethanol refining profitability.

Spot prices for both ethanol and corn put the corn crush back into positive territory this morning ahead of the USDA crop summary, but last week's closing margin points to the current fragility of the ethanol refining business.