According to newratings.com, Analyst Heather L Jones of BB&T; Capital Markets has in a research note published today, given VeraSun and Aventine Renewable Energy holdings both a buy rating.

VeraSun gets a buy because the company is competitively well positioned on account of its sound management and comparatively sizeable scale. And Aventine because of the company’s large marketing scale, low-cost profile and management represent major competitive advantages.

No doubt about it, we have been going through an ethanol boom - as decribed in this google video. A more sceptical view was recently expressed by a Swiss Bank - Sarasin - who said that the ethanol boom was unsustainable for two reasons;

(a) insufficient land to support corn grown for both food and fuel

and

(b) an insufficient market for the byproducts of ethanol production.

I think Sarasin is probably right. The mistake though is to assume that if a technology like ethanol cannot be all of the solution, that it cannot be even a part of the solution. Bioethanol and biodiesel make up such a tiny fraction of transport fuels in the USA, that a growth to double digits - say 10% and no further - represents an enormous growth opportunity between now and then.

Aventine Renewable Energy has just taken another knock. This time, it is because Soleil Securities has downgraded Aventine Renewable Energy from Buy to Hold with a $25 price target.

This comes less than a week after Analysts at DE Research gave the company a "neutral" rating with a target price is set to $32.

There has been quite a shake-out in the ethanol sector over the last couple of months. Confidence in the sector has been tested by the Xethanol share sleuth story and some hard questions about how big an impact biofuels can make, given existing agricultural resources and rising energy demand.

It has to be said though that biofuels are still at their very beginning and whilst scaling up is going to be difficult, the external pressures that work in their favour such as high oil prices and middle eastern security concerns are not going away any time soon.

VeraSun Energy Corp has just posted much improved Q2 results on 2005 - quarterly profits of 19-six (m) million dollars or 29 cents per share.

The South Dakota-based company is attributing its revenue growth to increased capacity and higher prices. Its Fort Dodge, Iowa, plant added 36 million gallons of capacity and a per-gallon price of one dollar and four cents higher than during the second quarter of 2005.

It has also been noted elsewhere that Bill Gates now has a large stake in Pacific Ethanol. But Bill Gates is not Warren Buffet. Brilliant as he has been in his stewardship of Microsoft, no one is yet proclaiming him to be an investment guru.

So potential ethanol investors would do well to look at this well-balanced piece published in Barron's yesterday, before succumbing to the stardust of celebrity or big name investment.