U.S. ethanol producers, faced with slowing growth in demand, are turning to a fledgling market for corn oil to help boost revenues, The Wall Street Journal reported..

Several of the nation’s largest ethanol companies, including Green Plains Renewable Energy and Valero Energy Corp., have invested in equipment to produce the oil. Extracted during the production of ethanol, corn oil is mainly used to make animal feed and biodiesel, but it also can be produced for cooking.

The volumes ethanol producers plan to make are expected to be small compared with the 2 billion gallon U.S. market for soybean oil, which is nearly interchangeable with corn oil. Still, the new product adds an important revenue stream for ethanol makers, who face flattening demand, historically high corn prices and volatile energy markets.

Ethanol production has been profitable throughout 2011, with the Renewable Fuels Association projecting production at a record 13.7 billion gallons. Still, the rapid gains in demand are seen slowing. The industry is nearing 15 billion gallons, the annual amount that federal law requires refiners to blend into gasoline by 2015.  

Further gains past the federal mandate are hampered by weakening support in Congress, concerns over the effects that increased ethanol use would have on older engines and changes that gas stations would have to make to their pumps.

Ethanol producers are “going to have to be creative in ways to generate more profit,” said Jason Ward, an analyst with Northstar Commodity Investment Co. in Minneapolis. Demand “really can’t go much higher,” Ward said.