ethanol could be a winner in us

http://www.forbes.com/markets/2007/07/25/ethanol-verasun-update-markets-equity-cx_af_0725markets29.html?boxes=relstories


confirms my psoitive view on biofuels in us. Relief is on the way for ethanol producers. Scarce corn spiked costs for makers of the alternative fuel, but prices are poised to abate.

Citi Investment Research analyst David Driscoll told clients to pick up a couple of ethanol producers because a giant corn crop will tackle elevated prices. Driscoll initiated VeraSun Energy (nyse: VSE - news - people ) and BioFuel Energy (nasdaq: BIOF - news - people ) with "buy" ratings on Wednesday.

Shares of VeraSun Energy, which is headquartered in Brookings, S.D., gained 1.5%, or 21 cents, to $14.29. Shares of BioFuel, which is headquartered in Denver, Colo., gained 0.7%, or 6 cents to $9.15. Both are pure-play ethanol producers.

Ethanol producers have been squeezed by rising costs lately. Corn prices skyrocketed as demand from ethanol and food producers outstripped supply. But prices now look likely to abate because of ramped-up production. The Department of Agriculture reported last month that farmers planted 19% more corn than they did a year ago. (See: "Corn Is King In the U.S.")

Driscoll predicted corn will fall to $2.75 per bushel. On Wednesday, a bushel was trading for $3.11 at the Chigaco Board of Trade.

Relaxed prices would boost producers' margins at a time when the sector enjoys strong political support. "Bipartisan political support for ethanol continues with all signs pointing to increased mandates for ethanol," said Driscoll.

Politicians have been supporting ethanol as a clean energy alternative that allows the U.S. to reduce its dependence on foreign oil. The federal government currently gives ethanol producers a tax subsidy the equivalent of 51 cents per gallon