by The Investment U Research Team

The reports coming out from the U.S. Department of Agriculture suggest that this year’s corn crop could be a record breaker. If conditions hold, 2009 could be one of the best corn crops of the past thirty years.

And that’s a good thing for ethanol producers.

A majority of the ethanol industry is still in shambles from the collapse of oil prices. Companies have been crippled by a laundry list of issues – many self-inflicted: misjudged corn hedging, over expansion, and dependence upon government regulation.

However, at the end of the day, cheap corn spells increased profits for ethanol producers. A big crop mean low corn prices, and you can already see the impact on some of the more well-known ethanol companies.

Green Plains Renewable Energy (Nasdaq: GPRE), Pacific Ethanol (Nasdaq: PEIX), BioFuel Energy Corp (Nasdaq: BIOF) and New Generation Biofuels Holdings (Nasdaq: NGBF) have all seen increased volume and some price activity.

Even defunct Verasun (OTC: VSUNQ) and Aventine Renewable Energy Holdings (OTC: AVRNQ) have seen recent interest – and they’re bankrupt.

But on further investigation even those companies not in bankruptcy don’t look incredibly strong. It reminds us that while ethanol may become a integral aspect of our future energy picture, many of these companies have yet to prove that they can consistently perform.

It’s why the sector will continue to be filled with great promise and even greater risk that approaches highly speculative.

View original at: Investment Advice and Investment Research with a Contrarian Point of View

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