Is The Writing On The Wall For US Ethanol From Corn Industry?

Shares in US ethanol manufacturers took a pasting on Wall St Wednesday as they struggle with volatile corn prices and struggle with cash.

A couple of years ago ethanol from corn was seen as the golden child. "I'd rather have corn farmers growing energy rather than import oil from countries that may not like us - that's how I view it," said Bush, famously, or should that now be infamously?

Investors were throwing money into companies setting up new ethanol plants like it was sure-fire certainty. Suddenly, things don't look quite so rosy.

If you aren't even sure which bank you can trust with your money, then you certainly aren't going to put it into an industry totally reliant on government tax breaks to survive are you?

Where competition from the likes of Brazil and it's far more efficient and rapidly expanding ethanol from sugar-cane industry amkes your investment look pretty unrealistic?

Alfred Szwarc, director of Brazil's Sugar Cane Producers' Association, said this week that his country will open 25-30 new ethanol from sugar cane plants this year.

Brazil will see ethanol output rise 27% to 24.3 billion litres from the 2008/2009 harvest, Szwarc added.

In the US, Aventine Renewable Energy Holdings said Wednesday that it would seek to issue new debt and shares to shore up its cash position, or it would have to delay construction of some plants, it's shares fell 22 percent to $3.94 in afternoon trade.

VeraSun Energy has got it's corn bought on the wrong side of the market. It warned this week of a much larger-than-expected quarterly loss. Its stock plunged 72 percent to just one dollar Wednesday.

VeraSun says it expected a third-quarter net loss of $63 million to $103 million, far higher than the $2.4 million loss analysts had forecast.

VeraSun is issuing 20 million shares as it's stock trades at new lows, which analysts noted was "not something most companies would normally want to do."

Denver-based BioFuel Energy Corp were also in trouble Wednesday with it's shares down 31 percent. It has also got caught on the wrong side of corn trades and said last month it did not have the liquidity to meet $26 million in hedging losses.