Ethanol maker VeraSun files for bankruptcy protection - Los Angeles Times

VeraSun Energy Corp., the second-largest U.S. ethanol producer, filed for bankruptcy protection after making bad hedging bets on corn, a raw material used to make the fuel.
...
The bankruptcy is "a pretty big deal for the industry," Pavel Molchanov, an analyst at Raymond James & Associates in Houston, said before the filing was made public.

A hedge is a financial instrument used to lock in commodity costs.

The company said it locked in corn costs as the price reached almost $8 a bushel after floods threatened crops in the Midwest. By late October, corn had tumbled to $3.64 a bushel, a 21-month low, on concerns that economic weakness could hurt demand for food and livestock feed.

VeraSun joins Greater Ohio Ethanol, a closely held refiner, and Gateway Ethanol in bankruptcy. Other troubled ethanol makers include Biofuel Energy Corp., which said it had $46 million in combined corn, ethanol and natural gas hedge and mark-to-market losses and might restructure.