Ahead of the Bell: VeraSun Energy downgraded

Piper Jaffray analyst Michael E. Cox cut his rating on the Brookings, S.D.-based company to "Sell" from "Neutral" and his price target to $2 from $4.75.

The new target implies he expects shares to fall about 51 percent from their Wednesday closing price of $4.06.

Prices for corn--an ingredient in types of ethanol--have jumped in recent months due in part to energy demand and recent Midwest flooding. The result is a drop in "crush margins"--the profit spread between ethanol and corn inputs per gallon--to 20 cents per gallon from 45 cents per gallon in the past five months, Cox said.

"Over this timeframe, the crack spread between ethanol and oil prices have widened significantly, indicating a lessening relationship," Cox wrote in a note to clients. "Should this dynamic hold, and we see no reason for it to change in the near term, we believe that ethanol producers will continue to face significant margin headwinds."

Shares of VeraSun have dropped 73 percent so far this year.

A company representative was not immediately available for comment.

VeraSun shares lost 6 cents to $4 in premarket trading.