Tate & Lyle forecast that ethanol producers will struggle for another year as it announced the mothballing of a $260m US corn mill before it has even been opened.

Iain Ferguson, the UK sugar group's chief executive, said that while construction of the Fort Dodge ethanol plant in Iowa was nearly finished, its opening was being delayed because of "continuing severe short-term pressure" on production margins.

At current corn prices, ethanol needed to be selling at $1.80-$2.00 a gallon to make production profitable, he said. May ethanol closed at $1.575 a gallon in Chicago on April 1.

It was likely to be another year before the tough market conditions, which have already forced some US producers such as VeraSun into bankruptcy, had recovered enough to warrant opening Fort Dodge.

"The timescale for consistent profitability in ethanol is early to mid 2010," Mr Ferguson told analysts.

Many of the staff it had hired to run the plant would be "let go", he added.

Tate, which already processes around 2% of US corn consumption at three other plants, commissioned Fort Dodge in 2006 to process 150,000 bushels of corn a day, and with capacity for 100m gallons of ethanol.

Profits miss

Mr Ferguson's comments came as Tate warned that it would not, as it had previously hoped, be able to match in its 2008-09 financial year its pre-tax profits of a year before. US demand for sweeteners and industrial starches was "weak", and profits down on Sucralose, Tate's low-calorie sugar substitute.

Nonetheless, thanks to lower taxes, the group said it was on track to hit earnings forecasts.

And the group pleased investors by saying that it had cut debt by £300m to less than £1.25bn in three months.

"Given Tate's relatively high gearing levels, this news has encouraged investors concerned regarding the reliability of the dividend payout," Jeremy Batstone-Carr, an analyst at Charles Stanley, said.