The implosion of the corn ethanol sector continues. Last week, VeraSun Energy Corp. announced that it expects its third quarter loss to reach $464 million – more than four times the amount that it mentioned in an earlier filing.

The news of the expected loss is just the latest twist of events for VeraSun, which declared bankruptcy last month. And the VeraSun saga is emblematic of an existential crisis for the entire corn ethanol industry. Plummeting oil prices – which have been accompanied by falling corn prices and a softening global economy – have torpedoed the sector.

VeraSun’s strategy was to grow rapidly. It achieved that goal. It expects third quarter revenue of $1.08 billion – more than four times the $221.9 million that it recorded in the year-earlier quarter. But those increasing revenues are accompanied by huge losses. VeraSun hedged its corn costs last summer when prices neared $8 per bushel. By late October, corn prices had fallen to less than $4 per bushel and those hedges are reportedly one of the main reasons for the company’s huge third quarter loss.

Founded in 2001, the company went public in June 2006. On its first day of trading, shares of the North Dakota-based ethanol producer, jumped by more than 30 percent during their first day of trading. The company’s initial public offering raised about $420 million, which the company said it would use to build more ethanol-production capacity. Just after it went public, VeraSun’s price-to-earnings ratio, a standard method of valuing stocks, was a whopping 200. Just for comparison, Google, one of the hottest companies in America, had a price-to-earnings ratio of 67. That same month, Valero, America’s biggest oil refiner, had a price-to-earnings ratio of less than 9. But the heady days of cheap corn and high gasoline prices didn’t last. And on November 3, the New York Stock Exchange suspended trading in VeraSun stock.

VeraSun joins other ethanol makers in bankruptcy court. Greater Ohio Ethanol, a privately held firm and Gateway Ethanol declared bankruptcy earlier this year.

Tom Elam, an Indiana-based agricultural economist who has long been a critic of the corn ethanol industry, says the bankruptcy of VeraSun should not be a surprise to anyone who has watched the farm sector. “We have never see the government intervene before in such a heavy way in any agricultural commodity as they have in the corn ethanol sector,” said Elam. “The government has mandated the use of a fuel that is totally uneconomic. It can’t be produced at a profit. And now the entire sector is in turmoil.”

Amazingly, corn ethanol still sells for more than gasoline. For the month of October, according to the Nebraska Energy Office, corn ethanol was selling for $2.51 per gallon while unleaded gasoline was selling for $2.02. Thus, to get the energy equivalent of a gallon of gasoline, a consumer would have to buy $3.33 worth of ethanol.

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