Sometimes, the best cure for a hangover is to keep drinking. But ethanol investors, hit by the shakes since they binged on the corn-based fuel in 2005 and 2006, should think twice before taking the hair of the dog. The bankruptcy of VeraSun Energy, the biggest listed US ethanol producer, is the latest grim news for a sector where listed companies have lost 80-90 per cent of their market value over the past two years. Ironically, for an industry savaged by rising corn costs, VeraSun shows that falling corn prices are one of the biggest short-term threats.

Like some rivals, VeraSun took out hedges to protect against rising prices after corn hit a record price of $8 a bushel in June. Yet those hedges backfired as bushel prices went on to halve, leaving the company strapped for cash. For others also, the recent pullback in corn prices has offered little respite. As recession fears have grown, ethanol prices have plunged in tandem with corn prices, so depriving producers of any hoped-for boost to margins.