Rising corn costs raise ethanol concerns

Following an investment boom, analyst voices worries over the impact of falling corn prices on ethanol makers.

Financial analysts are reconsidering the prospects of corn-based ethanol makers in light of rising corn prices.

Corn serves as the primary source of ethanol in the United States where federal regulations provide subsidies to encourage use of biofuels. And the growing interest in has spurred an investment boom in biofuels production.

But as agricultural companies report earnings and cite higher corn prices, analysts are voicing concerns over overheated expectations around corn-based ethanol.

In a report titled "The Bloom is off Ethanol" covering VeraSun Energy, WR Hambrecht on Tuesday said that "the pricing environment is working against" the company.

With the rising interest in ethanol, corn production in the U.S. is projected to be its highest since World War II. That is expected to put a damper on prices.

Agriculture giant Arthur Daniels Midland earlier this month also reported earnings that were lower than analysts' expections, also citing corn prices.

 

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