One way to get around this is to use a non-food crop to produce the ethanol, for example in Ottawa we have a company (Iogen) which produces enzymes to digest cellulose (dead wood) into ethanol. It's unclear wether that energy balance is positive yet, and many areas in the third world don't have wood to spare. But the problem may be ethanol itself. It is a very toxic product for cells, and we may have already reached the ethanol capacity of microorganisms.
An alternative is to produce oils instead of alcohols. The Jatropha produces seeds that are 40% oil, the plant itself is resistant to drought and pests, and it is not edible. Basic chemestry will tell you that oils are much more energy dense than sugars or alcohols. Again I'm not sure what the energy balance is for this plant but I can tell you it's superior to corn. Corn produces about 18 gallon equivalent per acre, while Jatropha produces 202 gal/acre. Already in India, the Mumbai-Delhi train uses a 20% biodiesel mix from Jatropha planted along the tracks. Oils form coconuts and palm are also very energy rich, and have great yields, but the agriculture is more energy intensive, and you are competing with food usage.
Another alternative are algae. They are relatively easy to grow, and there is a lot of space to grow them in the open ocean. Some figures based on a very generous 60% oil content estimate a maximum capacity at about 5000gal/acre. These microorganisms might also lend themselves to genetic manipulation and maybe even synthetic biology one day.
One of the most expensive steps in producing ethanol is the distilling. When it comes to oils, separating them from water is really easy, but it's the transformation into diesel that is limiting. But once again you can count on biology to provide the answer: enzymes found in fungi. Metarhizium anisopliae produces copious amounts of lipase, prefect for transforming the oils.