Now, the pressure has softened, but margins are still slim for the ethanol industry.

At the end of June, corn ethanol futures prices were as high as $US2.90 and are now back down in the $US2.15-2.20 range.

During the same period, corn and crude oil prices have fallen more quickly than ethanol, which has given ethanol producers a bit of renewed profitability.

But Pat Westhoff, co-director at the University of Missouri's Food & Agricultural Policy Research Institute, said assuming that the wholesale price of ethanol becomes more in line with ethanol futures, ethanol producers could be back to relatively thin margins.

Bob Dinneen, president of the Renewable Fuels Assn. (RFA), said gasoline prices are currently high, but ethanol prices haven't followed suit.

Refiners aren't really paying the full value for octane for the volume ethanol provides, but "that too will turn around over time", he said.

Rich Nelson, Allendale Inc. director of research, questioned whether lower corn prices will stimulate demand for ethanol use.

Through most of 2008 plants have only seen a 10-20pc increase on investment.

"We have not seen corn prices drop enough to offset ethanol prices," Nelson said.

He expects new-crop corn use for ethanol to be only 4.0 billion bushels, lower than the US Department of Agriculture's August estimate of 4.1 billion bushels.

Plants are also doing everything possible to reduce overhead costs.

The industry average ethanol conversion is roughly 2.75 bu. of corn.

As newer plants come on line, efficiencies improve and raise the overall industry average.

New technology from companies such as ICM offers retrofits for plants to better segregate the kernel and capture more value beyond just ethanol.

The process improves efficiencies by cutting natural gas consumption (up to 80pc) through gasifying the waste.

It also decreases water consumption and extracts more oil from the kernel for food use.

Payback on the retrofits is reportedly one year, offering ethanol companies a significant incentive to make the changes.