Companies have seen their margins squeezed in the past few months as prices for the crops used to make the fuels have gone up while biofuels prices have gone down (see Ethanol Margins Suffer and Ethanol's Tough Times Continue).

And news last week suggests the sector will continue to struggle with marketplace volatility.

First, a group of Seattle employees sent a petition with more than 700 signatures to Seattle Mayor Greg Nickels, questioning the Seattle City Employees' Retirement System's financial support of Imperium Renewables, according to the Seattle Post-Intelligencer. According to the newspaper, the Seattle City Employees' Retirement System invested $10 million in Imperium.

In the past two months, Seattle-based Imperium has cut its workforce and delayed plans for an initial public offering (see The Week: Tesla, Imperium Reduce Staff and Imperium IPO Delay Underlines Feedstock Shortage, Analyst Says). Former CEO and Chairman Martin Tobias also stepped down (see Imperium CEO Leaves Amid Biofuel Profit Pressures).

And across the globe, Europe is considering reducing its biofuels targets and banning imports of some biofuel crops (see Racing Toward Green, as well as Reuters, Guardian and New York Times stories). In addition, uncertainty about the future of Germany's biodiesel industry is taking root, according to Reuters, which suggested a biofuel tax increase this year is eating into sales and limiting the sector to about 10 percent of capacity.

Still, there's some evidence that some companies are profiting from biofuels today. Monsanto earlier this month posted a quarterly profit of $256 million, triple the year-ago quarter, selling genetically modified seed and herbicides (see Grist posting).

Thinking Outside the Feedstock Box

It's clear not all are suffering. Aside from suppliers like Monsanto, companies and researchers who are working with new feedstocks are making strides -- and attracting investors.

Ethanol startup Coskata, which intends to deliver ethanol for less than $1 per gallon using agricultural and municipal waste, said Jan. 13 it had raised an undisclosed amount from General Motors (see With GM Deal in Hand, Coskata Promises $1 Ethanol).

Renewable-energy company Xethanol (AMEX: XNL) announced last week that U.S. Department of Agriculture researchers have been able to produce cellulosic ethanol -- made from nonfood materials -- 22 percent faster while increasing their yield by 11 percent.

Meanwhile, researchers at Washington University in St. Louis have figured out how to turn some of the harder parts of a plant into fuel, according to CNET.