U.S. ethanol makers to consolidate in 2009-lobby

WASHINGTON, Nov 17 (Reuters) - Stressful times for U.S. ethanol makers could spur some consolidation of the industry in 2009, the head of an ethanol trade group said on Monday.

Profit margins for the fuel additive are tightening and, with Americans driving less, there is less demand for ethanol, say analysts. As well, the renewable fuel now costs more than gasoline due to lower oil prices.

"I think you are likely to see some consolidation in the industry next year," said Bob Dinneen, head of the Renewable Fuels Association, during a U.S. Energy Association briefing.

"It's a difficult time," he said, and there may be additional bankruptcies among ethanol firms.

One of the largest U.S. ethanol makers, VeraSun Energy Corp VSUNQ.OB, is in bankruptcy.

All the same, Dinneen said the industry has a bright future. The 2007 energy law calls for larger ethanol consumption in 2009 than the 9 billion-gallon target for this year. Market prices for corn, the feedstock for the bulk of U.S. ethanol, are down.

Dinneen also said:

--the long-standing federal tax incentives for ethanol will help the industry weather low gasoline prices and are a way to assure growth. "The relevance and importance of the tax incentive today is greater than it ever has been."

Foodmakers and livestock groups are expected to call for elimination of the tariff on imported ethanol and the 51-cent a gallon tax credit for blending ethanol into gasoline.

--President-elect Barack Obama will be a strong supporter of the federal mandate to use ethanol and supports development of new feedstocks, such as cellulose, based on campaign statements.

--the largest ethanol maker, privately held POET, based in Sioux Falls, South Dakota, has dropped membership in RFA, at least temporarily. POET's head, Jeff Broin, is a prominent member of a new group, Growth Energy, which seeks a higher blend rate for ethanol. (Reporting by Charles Abbott; Editing by Marguerita Choy)