Bank of America analysts began coverage of four ethanol producers Friday, and rated only one a "Buy" as the industry braces for squeezed margins on higher raw material costs and lower pricing power.

Ethanol is an alternative fuel largely made from corn in this country and used primarily as an additive to gasoline.

Analyst Philippe Lanier began coverage of Aventine Renewable Energy Holdings Inc. with a "Buy" rating and a $50 price target -- the brokerage's only top rating among the four producers.

The ethanol industry has seen prices decline in tandem with the recent drop in oil prices. At the same time, corn costs are on the rise -- a reversal of the market earlier this year that was marked by high ethanol pricing and low corn costs. While the rest of the ethanol producers will likely feel the margin crunch from current market conditions, Lanier said Aventine may be buffered from those risks due to its distribution business.

"Aventine operates a large distribution network many of its peers lack, which results in lower costs and additional revenue, resulting in 50 percent higher profitability per gallon than its pure-play peers," he wrote in a note to clients.

Separately, Bank of America analyst Eric K. Brown started Pacific Ethanol Inc. -- which recently started operations at its first ethanol plant -- at "Sell," saying the company will likely face eroding margins and capacity uncertainty in the coming months.

"We have forecast that substantial new ethanol capacity coming online will pressure ethanol prices and drive up corn costs for Pacific Ethanol and other ethanol producers," Brown said.

He started VeraSun Energy Corp. and Andersons Inc. at "Neutral."

Shares of Aventine Renewable fell 66 cents, or 2.8 percent, to $23.12 in afternoon trading on the New York Stock Exchange, while VeraSun Energy shares rose 6 cents to $18.60.

Pacific Ethanol shares lost 65 cents, or 3.8 percent, to $16.62, and Andersons shares fell 61 cents to $37.77 on the Nasdaq.