Very few people drive down the miles-long highways and dirt roads in the middle of the country to see combines cut grain and fertilizer trucks spread chemicals. The picture is not monochromatic, at least not up close.

The expense of commercial fertilizers is so high that growing pastures for feed cattle is no longer viable. Processed human waste in pellet form is one of the few remaining methods for improving field production for crops which do not bring high prices. An entire segment of the agricultural industry is being forced to it knees.

At the same moment, farmers of corn, wheat, rice, and soybeans cannot plant enough crops to keep up with demand. The price of fertilizer matters much less to them.

New data from The U.S. Agriculture Department show a drop in total acres devoted to corn added to demand for ethanol production will keep prices for the commodity high through 2009. Corn now has to compete with other crops for yield-per-acre.

According to The Wall Street Journal "the U.S. ethanol industry is projected to use a record four billion bushels of corn, or one-third of the harvest that U.S. farmers are expected to collect this autumn." The federal government has provided a number of incentives to keep the ethanol industry in business. The desire to replace oil demand is a powerful, but perhaps lost cause. At. least for ethanol.

Wall St. is already creating the beginning of the end for ethanol stocks. Shares in Aventine Renewable Energy (AVR) are down to $4 from a 52-week high of nearly $20. Verasun (VSE) is off to $6 from a 52-week high of over $18  Of course, larger companies like ADM (ADM) have a small part of their business devoted to ethanol production, so small that the impact to the value their shares has been largely insulated.

As the choice with commodities like corn moves to one of food versus fuel and commodities prices versus the price of gasoline, ethanol companies are bound to lose.

Every once in awhile a promising industry grows up and then disappears, both in the matter of a few short years. The ethanol business is one of them

Douglas A. McIntyre

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