General Motors (NYSE: GM) announced this weekend at the North American International Auto Show in Detroit that it would partner with Coskata Inc., an Illinois-based renewable energy start-up company that plans to produce ethanol from agricultural, municipal, and industrial waste byproducts.

"GM is enabling Coskata to produce the next generation of biofuels -- without using a food source -- making it economically viable and commercially available," said Coskata CEO Bill Roe. "Alternative transportation fuels are coming faster than people think ... and will be available at a lower cost than people have imagined."

Coskata is backed by billionaire investor Vinod Khosla, said the Wall Street Journal, and is one of a handful of ethanol makers in the U.S. that are trying to develop a method for efficiently producing cellulosic ethanol.

But Coskata's cellulosic ethanol won't be available at retail gas stations until 2010 or later. The company maintains that its process is commercially viable already. It plans to open a 40,000-gallon demonstration facility by the end of this year to deliver ethanol to GM for vehicle testing, before building a 100-million-gallon commercial plant at an undetermined U.S. location.

GM's foray into the cellulosic ethanol field is part of a broader campaign to convince car buyers that it is committed to fuel economy and capable of competing with Toyota Motor Corp. (NYSE: TM) in terms of environmental leadership. GM's stake in the partnership with Coskata was undisclosed.

Dairy product marketers such as Dean Foods (NYSE: DF) and Kraft Foods (NYSE: KFT) are continuing to warn consumers, economists and investors of the pressures that rising corn prices will soon be placing upon our economy. The pursuit of an unfettered increase in corn based ethanol production is raising inflationary pressures on consumer pocketbooks by increasing the feed costs for dairy, beef , pork and poultry farmers. When coupling the feed cost increases with the higher prices for fuel and fertilizer, we have a recipe for inflationary spikes in consumer food prices which will most probably reach well into the double digits over the next three years.

National Milk Producers Federation spokesman Chris Galen said ethanol usage has led to higher costs for corn and wheat products, which in turn affects the cost of other products, as reported by UPI. Twice within the last six months Dean Foods has faced analyst downgrades as a result of the pressures that rising fuel and feed costs are putting on dairy producers large and small. One downgrade occurred in March and another occurred just this month. Those companies such as Dean Foods, which have their primary focus in dairy products, will be harder hit than companies which have broader focus similar to Kraft.

The opinion is expressed that investors who wish to play the ethanol game should be focusing their intentions on cellulosic ethanol interests rather than ethanol operations based on corn and sugars. While the profitability of cellulosic ethanol does not reach the same levels as ethanol from corn, in the long run the vastly lowered degree of raw material price volatility and the greatly reduced level of controversy will have cellulosic ethanol investors sleeping much more peacefully than their corn-fed brothers.