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Further proof that the caution flag is being waved in the U.S. ethanol market: Pacific Ethanol Inc. recently decided to suspend construction of a 50-million-gallon-capacity plant near Calipatria, Calif., until "market conditions improve."

In April, the company began building the plant, which is located on an existing American Grain Co. rail loop served by Union Pacific Railroad. Pacific Ethanol had expected to complete the facility in early 2008, but during the past few months, ethanol prices have dropped because of oversupply while corn prices have risen dramatically.

"Given current ethanol market conditions, we feel it is prudent and strategic to suspend construction until the market improves," said Chief Executive Officer Neil Koehler in a prepared statement.

Pacific Ethanol plans to continue building a 50 million-gallon-capacity ethanol plant in Burley, Idaho, to be served by Eastern Idaho Railroad and UP, and a plant in Stockton, Calif. The company currently operates plants in Madera, Calif., and Boardman, Ore., and retains a 42 percent interest in a Front Range Energy L.L.C. plant in Windsor, Colo., that's served by OmniTRAX Inc.'s Great Western Railway of Colorado L.L.C.

"We remain on target to attain our production capacity goal of 220 million gallons in 2008," said Koehler.