Ethanol Is Dead: How You Can Still Profit From It
There are several confluent factors driving the demise of ethanol in the US, and there are ways you can profit from the high price of corn. For years now, several astute investors, economists and consumers alike have decried the US ethanol policy as ill-conceived and perhaps the biggest ruse pulled on the populace in decades.
Given the following recent events, the government is finally being forced to seriously reconsider its ethanol policy and investors are looking to exploit this movement:
- Corn prices continue to break new highs as a result of midwest floods, demand for corn driven by the ethanol mandate, tariffs on imported ethanol and overall input/energy inflation in part due to a weakening dollar.
- The season's year end stocks could be the lowest since the end of WWII. I had posted recently on this problem with some useful visuals here (also outlining a double digit yield fertilizer stock).
- Based on the Texas governor's request to seek some relief by way of repeal of the prior ethanol legislation, the EPA has been forced to reconsider the ethanol mandate and has to make a decision on July 22 on the waiver request, 90 days after Texas submitted the petition. If this petition overturns prior legislation, you can expect ethanol stocks to plummet.
- Another tool at the disposal of the government is to remove/reduce the tariffs on ethanol from Brazil, which is currently deterring importation.
What's an investor to do?
Well, in looking at some of the big ethanol names, it's tough to find some decent put options to buy since they've all dropped 50-80% from their previous highs to the low dollar range. The best I could do on Friday was to buy some $2.50 August puts on Aventine Renewable Energy (AVR) and Verasun Energy (VSE), each of which are sub-$5 stocks; they were also downgraded recently by Goldman Sachs.
VeraSun Energy Corp. on Wednesday raised to three the number of newly built production facilities whose startup is being delayed due to "volatility in the market." Additionally, 12 small to midsize biodiesel and ethanol plants have declared bankruptcy in recent months according to various reports. Things aren't looking good for the industry.
While some of these stocks popped slightly on Friday, take a look at a once year chart of these once high fliers:
The puts were $.10 to $.15 each, so with just a hundred bucks or two, if the worst for these occurs and the government takes any meaningful action (or if even the perception of such action given further degradation in corn supply occurs), these stocks may very well drop below $2.50 and you can see a 10x or more return on your investment.
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This article has 53 comments:
BUT remember the "Mad Max" movie in a world where oil is a big problem... in that world, ethanol would have a tremendous value. It looks to me that the US is heading for that direction...?? Also many of the negative comments against ethanol are "misleading" about the rise of corn prices caused by ethanol... which is only 3% in reality. There are obvious other factors pushing corn much higher than just the ethanol usage.
They havesaid that they willbe putting out between 180 million and 220 million gallons of fuel within the next year and according to Yahoohave a forward P/E of 3.3
So, short ethanol stocks all the way to zero? How stupid! 18-22 states politically, will not allow media hype rants to overturn the momentum. Corn based ethanol plants can be converted to sugar. Where do we get the sugar cane? Brazil?
If oil goes to $200 soon, ethanol, with all its detractors, will be more efficient to run E-85 because oil will be pricing itself at $6.00-7.00/gallon and ethanol at $4.00, even at $8.00 corn, is a better buy!
Ethanol never was a "be-all end-all" game changer. But I like the notion of 25% of our energy consumption being paid to farmers and others in the US rather than to the Middle East and other rogue nations like Chavez, et al....60% of our trade deficit is now oil! Congress needs to wake up and smell the coffee!
gordon
> jack
Even the industry dares not make such an outrageous and clearly unrealistic claim. Indeed, less than two years ago it was taking full credit for driving up the price of corn by 50% -- above the trigger price for price-linked crop subsidies -- and thus saving the federal government several billion dollars a year in commodity payments. (Of course, the industry generally failed to mention in the same breath that, in its place, the federal government had to spend several billion dollars on ethanol subsidies in the form of tax credits to blenders.)
What the 3% figure refers to is the contribution that the rise in the price of corn has had on the consumer price index (CPI) for food. That may not sound like a large number, but when you consider that consumer expenditure on food in the United States is now on the order of $1.1 trillion a year, 3% is more than $30 billion per year -- far larger than the "savings" achieved by no longer having to pay out counter-cyclical or marketing loan payments to corn farmers.
Subsidy Eye - That 3% figure was properly reported on Bloomberg from interviews of a recent conference attended by those directly concerned about this food/fuel issue. So your attempt to make the 3% issue look more like a 50% issue is possibly need of further study also.
In answer to PoliEco: True, not all ethanol is corn ethanol. But thanks to years of subsidies to the corn industry; state and federal subsidies for the construction of ethanol plants in the corn belt; and tariffs on imports of ethanol from Brazil, 95% of the ethanol produced in the United States is derived from corn.
In answer to Rickrents: the Governor of Texas is not so much concerned about protecting Exxon as in reducing the price of feed for the livestock industry.
gordon
> jack
There is no intelligence life in politics.
Cellulose ethanol will come but in the interim I am betting on Cyclone Power Technologies (CYPW) which is developing (just got a contract from Raytheon) for a new engine that will burn gas, diesel,bio-diesel, a lot more effeciently than current ic engines; named the best invention of 2008 by Popular Science magazine.
Henry didn't know that sugar contains 6X the energy of corn.
Since it has to be trucked, much fuel is consumed transporting it to its final destination, and it requires a lot of fuel and water to grow the crop and distill it to its final form. In addition, fuel containing alcohol provides 15% to 20% lower gas mileage.
I refuse to use it in my vehicles, as I don't want some damn fool politician telling me how to run my life.
The country agrees with you. That is, everybody but the corn farmers and the Congress.
Well said!
It takes 1.3 barrels of oil (...or the energy equivalent) to make a barrel of corn ethanol. Sounds like the rest of the Congressional energy policy to me!
The energy figure paulk8756 is refering to is one that is almost 20 years old and often cited. Energy use has been reduced to 0.74 million BTUs of fossil fuels for every 1 million BTUs of ethanol. Making gasoline actually requires more. 1.23 million BTUs are required for 1 million BTUs of gasoline. This is due to the heating needs of a refinary which usually needs to operate at about 600C (separation) depending on the crude. sweet crude can yield other usable fuels and products that lower the energy impact.
Water usage is also often cited at 7 gallong per gallon of ethanol. This number is now between 3-4 gallons of water. Crude is pumped using water injection.
The "inefficiency&quo... of cars using ethanol is not fuel's fault. although ethanol has a lower heating value, it is also a higher octane fuel. if an engine is operated at higher pressure, it will operate more efficiently and the result will be higher gas milage (compression system required - turbo or supercharger). this effect is very similar to diesel fuel.
I agree with many of you that ethanol is not an answer, but it is a part of the solution. one part that is not is "just pump more". this cramer-like policy will get us nowhere. the united states needs a clear energy policy and a view for the future. the government needs to look through the system currently in place and ease certain limitations and tariffs.
we also MUST give credit where credit is due. the ethanol credit goes to blenders. the producers and people developing the technology receive a trickle down effect at best. ethanol has a place in this world and is the best octane booster we have (besides lead). this is a great injustice and an incredible raid by the inegrated oil giants. i applaude them.
As rising food prices continue to threaten food security around the world, Brazilian ethanol is one obvious solution being largely ignored. Brazil set up its efficient fuel alternative program in the 70s, when the first oil crisis hit the world. Now Brazilians drive cars moved by ethanol or gasoline mixed in any proportion. And since long ago gasoline in Brazil is not pure, but blended with 25% ethanol, resulting that internal consumption of ethanol in the country is already superior to gasoline's. Ethanol in Brazil is already much cheaper than gasoline at current international oil prices.
Brazilian ethanol is produced from sugarcane without any governmental subsidies and the fuel has a very competitive price. Researchers are increasing the productivity (more fuel extracted per sq.km. of crops) by adapting sugar canes species to each type of land and topography. The productivity now is more than 3 times the records of 30 years ago and it keeps on raising, being expected to soar very soon when the technology to extract ethanol from cellulosic materials (crop waste) will be available for large scale production.
Ethanol production in Brazil uses just one percent of total arable land, and the country can expand its sugarcane fields without disturbing sensitive land areas (like Amazon), just by tapping land such as depleted pastures. Just raising intensity of cattle production from the current 0.8 animals per hectare to 1.2 animals (a target already far exceeded in many parts of the country) would release about 80m hectares of land for crops. There remains plenty of room for expansion: the country has 355 million hectares of farmable land, of which 7 million hectares under sugarcane of which the amount used to make ethanol fills 3.4 million hectares (compared to 200m hectares of pasture). Another 105.8 million hectares remained available, which allows Brazil to increase ethanol production without affecting the environment or food. By comparison, the additional terrain for Brazilian crops could surpass all of the land now under cultivation in the European Union.
Meanwhile, Brazilian food production has doubled in the past decade and that’s the most impressive thing about ethanol from sugarcane: in contrast to corn-based American ethanol or biodiesel derived from soybean oil, there is no cost pressure and no competition with food.
Another persuasive fact for incentiving ethanol production in Brazil is the electric energy that is generated as a by-product of ethanol processing: taking into consideration the energetic balance, the electricity generated in sugar cane processing in Brazil is almost as large as its ethanol equivalence. It's like a two large scale hydroelectric plants generating electricity exactly when it's more necessary: in the Brazilian dry season! So the producers of ethanol are also having increasing revenues by selling electricity to the country's national electric system, which has become an strategic and reliable source of electricity. For all these reasons, ethanol in Brazil is a win-win game for the country, the farmers, the consumers and the environment.
Off course Brazilian ethanol does not intend to concur with petroleum, but it could ease up current oil crisis by supplying a small part of the world energy demand. It is only necessary to look at the increasing demand from the non-oil countries like India and China to understand that the very high price of oil is here to stay. With the existing price of oil, the permanent threat of war in the Middle East, the international geopolitics, and the environmental problems, there seems to be no other easy solution for the energy problem away from the liquid ethanol produced out of sugarcane. This is certainly a very important aspect of the Brazilian economy for the next few years and the rest of the world will have to accept the reality of the liquid ethanol from sugarcane as the right and best solution for the oil crisis.
The problem is that much of Brazil’s ethanol exports continues to face prohibitive tariffs and other barriers to developed markets in the US and Europe. The United States currently places a 54-cent-a-gallon tariff on ethanol imported from Brazil. Consumers in the country are being severely affected, particularly in areas such as the Southeast, where corn does not exist and the logistics to bring ethanol from the center of the country is practically impossible. It is difficult to understand the maintenance these tariff levels, except for political reasons. The developed world appears purposely myopic in relation to the opportunities Brazil presents, maybe it's because that would upset wealthy US and European farmers – a price apparently not worth paying.
Almir R. Américo – Sao Paulo, Brazil (almiramerico@gmail.co...
angrybear.blogspot.com...
Saturday, June 28, 2008
Ethanol and food prices
It is my understanding that the major byproduct of ethanol is distillers grains that are used as feed for cattle, hogs and chicken with essentially the same nutritional value as feed grains that have not had ethanol distilled out of them. All distilling ethanol does is remove the starch from the food grains and leaves the protein, etc, that animals need to grow.
This means that the use of corn or other feed grains being used to produce ethanol does not divert feed grains out of the food chain.
A bushel of corn can be used to generate x pounds of beef or it can be used to generate z gallons of ethanol and almost the same x pounds of beef.
Doesn't this imply the argument I see on economic blog after economic blog that ethanol production is playing a significant role in higher food prices is incorrect.
Rather the Department of Agriculture and/or Bush Administration argument that ethanol production plays an insignificant role in the current run up in food prices is correct.
Does somebody have reasonable evidence that this analysis is incorrect?
UPDATE !!!!
The beauty of the new world of the internet.
while I was looking into this question I ran across a very good article by Richard Perrin at the University of Nebraska on Ethanol and Food Prices
digitalcommons.unl.edu.../
ABSTRACT:
Food prices in the U.S. rose dramatically in 2007 and early 2008. Given the integration of the world markets for foodstuffs, prices increased around the world as well, leading to riots in a number of countries in early 2008. The popular press has tended to attribute these food price increases to demand for corn by the ethanol industry. Grain prices are one determinant of food prices, but they constitute less than 5% of food costs in the U.S.(a higher percentage elsewhere.) This paper focuses on the likely relationship between ethanol and food prices, ignoring the potential role of other important contributors. It finds that ethanol is responsible for no more than 30-40% of the grain price increases of the last 18 months. Food prices in the US increased about 16% over the last five years,7% over the past 18 months, but rising grain prices have contributed only about a 3% cost increase over these periods. It is reasonable to conclude that ethanol is responsible for increases in US food prices about 1% in the last two years – a relatively small proportion of actual of U.S. food price increases. In food-insecure areas of the world,however, the impact of ethanol on food prices has been higher, perhaps as much as a 15% increase, simply because the typical food basket in those areas contains more direct grain consumption.
so I sent him an email with my question and he was nice enough to respond with this:
You are right. One-third of the corn processed for ethanol is expelled as distillers grains and solubles (DGS.) (One third is ethanol, one-third CO2.) DGS has slightly higher feed value than corn when it's fed to ruminants (I have a publication with an animal scientist on this issue, if you become deeply interested, and could direct you to some others.) Since DGS can be directly substituted for corn, putting a ton of corn into an ethanol plant really only extracts 2/3 ton from the animal feed supply, so it would have been reasonable for me to assert that ethanol has accounted for only 30% of new net withdrawals of the world's coarse grains since 2000 (rather than 40%.) China, Sub Saharan Africa, and South America are each responsible for about 15%.
So the standard treatment of ethanol in the press and blog is significantly misleading.
Since corn ethanol is so competitive with other alternative fuels, then you wouldn't mind if the Congress eliminated its various corn subsidies and ended sugar ethanol tariffs, would you? Good, then you can get the corn lobby to tell Congress about their new position today. Give me a break!
You know, I was in the front row supporting you guys when farmers were going broke some years ago for ag subsidies, so you all could survive and we'd have affordable food products. But, now, like every other government handout, you've just become pigs at the trough.
You can gloss it over any way you like, but corn ethanol makes as much economic sense as steam locomotives. So long as you're getting yours, you don't care if gas and milk are both $5 a gallon!
Cars HAVE to be mostly electric in the future-- hybrids of various types. The electricity HAS to come from a sensible source-- not coal, not oil. We need nukes plus conservation plus wind plus wave plus solar. We don't have enough good farm land or water to feed BOTH people and cars sustainably on the scale required.
Sugar ethanol could work here, we could easily plant more and they practically have to give it away throughout the Caribbean. But the big problem is we'd have to convert every gas station in the U.S. to be able to use it.
So electrics are the answer. We'll have to upgrade our electric grid to use them, though. And we need more oil to get from here to there. Also, thus far, we have no policies (...translated into English that means ending existing environmental moratoria) to allow any of this to happen.
<blockquote>Most of the feed value can be recovered and one of the by-product of ethanol is distiller's feed. This contains 90% of the protein that corn originally had.</blockquote>...
Dried distillers' grains do indeed contain most of the protein originally in the corn, but essentially none of the original starch. (Overall, around 30% by weight of the original corn kernel is left over as DDGs.) That starch, unprocessed, may not be digestible by humans, but it certainly is by hogs and poultry. DDGs, however, is a poor feed for these animals, and only relatively small amounts can be added to their diets. (For cattle, the limit is around 40%.) That is why the pork and poultry producers are so against the subsidization and mandating of ethanol.
Enes K. also also notes that ethanol has a higher octane value than gasoline. Very true. He then points out that "if an engine is operated at higher pressure, it will operate more efficiently and the result will be higher gas mileage". Also true. But no commercial automobiles are being produced in, or imported into, America that are optimized to run on ethanol. Check out the EPA fuel-economy numbers for flex-fuel vehicles -- vehicles that can run on any blend of ethanol and gasoline up to 85% ethanol. They show, consistently, 25% lower miles per gallon running on E85 than on gasoline -- i.e., consistent with the energy difference between E85 and gasoline. Moreover, most of those vehicles have huge -- typically 5.3 litre -- engines. It is not for nothing that the National Ethanol Vehicle Coalition sells bumper stickers that owners can affix to their vehicles, proudly proclaiming them as ethanol guzzlers.
Most curiously, Enes asserts that, because the ethanol credit goes to blenders, "the producers and people developing the technology receive a trickle down effect at best". Gee, then if all the benefit is being pocketed by the blenders (i.e., gasoline wholesalers) why has the Renewable Fuels association and the National Corn Growers Association fought so hard for the continuance and extension of the blenders credit? The reason they have is because the credit does is raise the price that blenders are willing to pay for ethanol (since the blenders credit is like a partial refund), which means higher prices for ethanol producers. Ethanol producers, in turn, are able to pay more for corn, which "trickles down" to farmers. But I suppose those who maintain -- against all logic -- that ethanol has NOTHING to do with the rising price of corn will never believe that.
Avcacio quotes a blogger for his numbers. He should have read the original document more closely, which is an article by Richard K. Perrin, a Professor in the Department of Agricultural Economics, University of Nebraska, Lincoln. Professor Perrin does NOT say that ethanol contributed only 3% to the rise in the price of corn. What he says, in fact, supports my original point:
<blockquote>It finds that ethanol is responsible for no more than 30-40% of the [coarse] grain price increases of the last 18 months. Food prices in the US increased about 16% over the last five years, 7% over the past 18 months, but rising grain prices have contributed only about a 3% cost increase over these periods.</blockquot...
Note, he speaks of a contribution of 30-40% to the increase in grain prices (which themselves essentially doubled in price between January 2006 and January 2008), not 3%. Note Perrin was working on the basis of prices through the early part of the year, and does not take into consider the recent surge in corn prices.
Note also that Perrin takes 2001 as the baseline. In both 2001 and 2002, world use of coarse grains (corn, barley, oats, sorghum) grew by only 20 million metric tons per year. In 2003 it grew by around 50 million metric tons and in 2004 by around 70 million metric tonnes. About three-quarters of that growth came from non-ethanol uses. The rate of increase in growth in 2005 slowed slightly, to 70 million metric tonnes. Over this whole period, coarse grain prices (in $ terms) increased by around 6% per year. (Price data are from the FAO.)
In 2006, however, demand jumped once again, this time by almost 100 million metric tonnes per year. Of that increase, almost 1/3 of the increase was U.S. corn used for ethanol. In 2007, the share of U.S. corn for ethanol in the increase in global coarse grain use was almost 40%. Its share in the increase of corn alone (which accounts for 70% of world coarse grain consumption) was even greater, at least 50%. (Note, also, that additional corn was used for conversion to ethanol in Canada and China.) In 2006, corn prices rose by 24% and in 2007 by an additional 34%. Already, in 2008, average prices for the year to date are 45% above those in 2007.
The reason that the effect of rising grain prices in the United States seems so small is that the contribution to total expenditure on food (45% of which is meals eaten outside the home) is so small is because the denominator, $1.1 trillion per year, is so large. But even a 1.2% to 1.6% increase in food prices translates to an increased food bill of $13 billion to $18 billion per year.
As a percentage of consumer income, the increase in prices comes out to an even smaller share. But I leave the last words to Perrin himself:
<blockquote>The value of grain in US consumers' expenditures constitutes only about one-half of one percent of consumer income, while in food insecure countries it may constitute 20% or more of total consumer income. Thus a doubling of grain prices can absolutely devastate the world's most food insecure families in poor countries and put them at the edge of starvation, even though it constitutes a barely-noticeable inconvenience to most families in the U.S. If U.S. ethanol is responsible for as much as 40% of grain price increases, simple cost pass-through reasoning indicates that ethanol may be responsible for as much as 12% (40% of 30%) of food price increases in food-insecure areas.</blockquote&...
The sentence in the 9th paragraph should have been "The rate of increase in growth in 2005 slowed slightly, to 79 million metric tonnes."
I gather this web site does not allow comments in HTML. So here are the links that should have appeared in my last comment:
National Ethanol Vehicle Coalition bumper sticker:
www.e85fuel.com/promoi...
"Ethanol and Food Prices -- Preliminary Assessment", by Richard K. Perrin:
digitalcommons.unl.edu.../
FAO price data:
www.fao.org/es/esc/pri...
Dr. Wang also reports the following energy balance numbers using the Fossil Energy Ratio = energy in fuel / fossil energy input
cellulosic ethanol 10.3
corn ethanol 1.36
coal 0.98
gasoline 0.81
electricity 0.45
I don't hear people complaining about the 20% energy loss in making gasoline or the >50% energy loss in making electricity. That is because these uses of energy are the norm and few people are aware of the energy balance associated with these highly convenient carriers of energy. Note a couple of these numbers were already posted by Enes K.
Corn ethanol is not the silver bullet for meeting our transportation energy needs. Right now no silver bullet exists. Maybe one will be found. For now it appears we will need to develop multiple technologies to displace the current set of multiple energy technologies that we use in transportation, heating, and generation of electricity.
Overall, corn ethanol is a step in the right direction and IMHO should be considered as a stepping stone technology just like hybrid cars. The floods will be gone next year. Maybe we should consider shorting corn in the next few months?
Cellulose Ethanol on the GO!
Canada:
Major Step Forward For Proposed World Leading
Ethanol Biorefinery In Canada
Vancouver, BC, March 14, 2008 – Canada’s Environment Minister John Baird is
pleased to announce that Iogen Corporation’s application for funding for
Canada’s first commercial scale cellulosic ethanol production facility has progressed to the due diligence phase.
“This is a good day for Canadians and our environment,” said Minister Baird. “Thanks to our Government’s allocation of $500 million for next generation biofuels, Canada is one step closer to making our country’s first full-scale cellulosic ethanol fuel facility a reality. With technologies such as this, Canada is
well-positioned to be a world leader in the renewable fuels industry.”
USA:
Pacific Ethanol Wins DOE Cellulosic Energy Grant
Tuesday January 29, 2008, 3:39 pm
January 28, 2008, -- Sacramento, CA -- Pacific Ethanol, Inc. (NASDAQ:PEIX), the largest West Coast-based marketer and producer of ethanol, today announced the U.S. Department of Energy has included Pacific Ethanol in a matching award totaling $24.32 million to build the first cellulosic ethanol demonstration plant in the Northwest United States.
Seekingalpha is to much negative about ethanol, I am rather looking at Seekingomega ;-)
Farming 101: Corn is expensive to grow and requires LOTS of chemical fertilization. Arable land is a finite resource. Water is a finite resource. Farming is weather dependent.
Agreed. And we are still paying those--why?
its impact on food prices is indirect. and that is the main problem. there is sooo much information that people do not know what to do with or believe. for example, cattle need starch, but the current movement is into lean muscle cattle ("healthy" alternative). dairy operations also care very little about starch and concentrate on getting protein and hormones to their milking cows. so how do you price corn? how do you quantify its impact on the price of rice which is a people only food? does corn impact rice? can the situation in india be explained using the same logic (export of rice is practically eliminated)?
the ag lobbies represent ag business interest and farmers, especially medium and small, are left out of the loop. most of the corn increase has benefited the suppliers. as proof, we need to look at fertilizer, machinery, and seed companies and the prices they charge. they are all doing GREAT.
the rest were bought out. the oil companies and their lobbies got a slice of the pie with the blender credit (which at current relative levels does not make sense). farmers are left in the middle and do not like what is going on. will they take higher corn prices? yes, but only to a certain extent. the input prices have gone to such levels that they are starting to switch to soybeans.
i think the increase in corn prices is more related to the dollar and the world increase in GDP. do we expect people to always eat rice and beans while the developed world eats $0.99 cheeseburgers at McDonald's? i think not. the dollar has lost a large portion of its value while the rest of the world has gotten richer off of commodities, exports, and a horrible budget deficit and management during the bush administration (deficit = imports for the US). now some of these "other" people are able to afford eating more and better food. the highest demand increase for meat products has come from countries that have seen large increases in income, dollar holdings, and rise of a middle class. this would include china, india, brazil, middle east, and russia. we can't use one logic for oil and other commodities and claim that corn prices are strictly affected by ethanol and imply that their increase is controlled by that. all of a sudden the global economy and the dollar have nothing to do with these commodity prices?
take care of the dollar, and it will take care of you. but that won't happen for now (yay bank lobbies).
PS
are the poor going to suffer? they always do during inflationary times. this is no different, but the rich get richer and fatter in those countries. and that is not going to change either (russia to me is still a communist country; as is india; the middle east is truly special; brazil has a boat load of case studies on income inequality).
NOT THAT big of an ethanol lover
whoops
Everyone now hates ethanol for whatever reasons.
That means TIME TO BUY!
my two cents, swap natural gas and gasoline. use gasoline for heating purposes and electricity and use natural gas as a motor fuel :)
...btw i know that idea sounds crazy
Weiman
All these people complaining about people in the poverty countries being starved to death because of the high price of corn.It
was on TV and in several newspapers,ag magazines, even on the stock report stations that the U.S.A. had shipped 13% more wheat &
15% more corn this year than last year at this time.Also it was reported that we have 19% more corn and 14% more wheat in storage than the same time a year ago. That was reported 6/24/2008. Today 6/30/2008 the Agriculture report confirmed this to be true. So just how is it that that so many people are being starved because of ethanol. It,s
been pretty well established that the cost of food has risen about
$400.00 per person since 6/1/2006. However that includes extra cost of shipping,packaging,eat... out at resturuants,and awhole host of other things. Most reports admit that only around 20% of the
increase in food cost is because of ethonol or higher grain cost.
It will take probably a combination of things to bring down the cost of fuel.Such as . People might drive a little slower, cut down on miles they are driving if possible. I know many people who hit
the C&W clubs and game rooms almost every nite of the week.
Also;I wonder how many bushels of corn are burned in the corn
burning stoves each year. Ethonol yields distillers grain which has about 28% protien compared to 7% that the corn yields prior to be-
-ing used for ethonol. Also cattle fed with distillers grain produces meat that is much lower in colesterol. I wonder how much distillers
grain or By-Product one gets after the corn goes through the corn
burning stove. And what about the corn put out for deer so the hunter who really likes to hunt the old way can get a 25 yd shot with his 7mm and the 12 X scope. Of course shooting from the deer
stand that has it all. No I'm not saying we should starve the deer out.
When I farmed in the 70's and early 80's I averaged around $2.75 per bushel of corn delivered to Cargill [38 miles one way]
Today corn should be easily twice what it was 30 years ago;even if
today it wasn't being used for ethonol. Corn selling between $5.00
and $6.00 and as high as $8.00 occasionaly would be only twice what it was 30 years ago. What else in this country can one name that isn't at least 5 to 10 times as much as it was in the late 70's.
The reason the cost of corn is where it is isn't solely because of
ethanol. Most of the rise in the corn price is because of the increase
in the number of floods & droughs around the world, not just the USA. Also the increase in demand for red meat[beef] in many countries around the world including the USA.
What we really need is a good TV special ;announced well
in advance that will bring out all the pros & cons on this
Ethanol issue. Especially what the price of fuel will be
if the ethanol idea is scraped . And also what the
price of corn is going to be afterward.Other
things such as how much food prices are
going to drop.If corn drops to $3.00,
how much is each tax payer going
to pay extra each year to keep
the farmers in bussiness.
I feel that if everyone would know the full ethanol picture and give it a chance;it could be a good thing for everyone. Don't just listen
to what the oil companies and their investors have to say about this. Take the time to look at every angle on the ethanol issue. In
California at least one ethanol producer has been able to reduce
the amount of corn used in the making of ethanol. Please don't
write ethanol off without knowing all the pros & cons.
Leslie W
Finance
Note that both stocks are down 7-8% today. Armor starting to crack further? I can only hope this ethanol hoax comes to an end by August expiry; I'll be sitting on 10-15x returns on my out of the money puts.
Great discourse here by the way;
Measured how? According to the Energy Information Administration's latest study on "Federal Financial Interventions and Subsidies in Energy Markets",
www.eia.doe.gov/oiaf/s... ,
federal subsidies (including tax expenitures) for natural gas and petroleum were $2.15 billion in 2007 (p. xii), against $3.35 billion for biofuels, mainly ethanol (p. xviii). Many people would contend that the EIA's estimate for petroleum is an under-estimate, but so is its estimate for biofuels.
According to an in-depth study produced for the Global Subsidies Initiative by Doug Koplow (who also authored the 1998 investigation into oil subsidies for Greenpeace),
www.globalsubsidies.or...
total federal and state support for ethanol was at least $6.9 billion in 2007, or $1.05 per gallon. In energy terms, that comes to $1.40 per gallon of gasoline equivalent (based on a generous conversion rate of energy equivalence).
For gasoline to be benefitting from a similar rate of subsidization, total subsidies for gasoline would have to be on the order of $200 billion a year. I know of no credible estimates that place the subsidy anywhere near that.
Thanks, Subsidy Eye.
As long as we work business as usual, we will certainly be last place on the global technology front.
Analyst
And finally, eveyone has thier own metod on calculating margins. Mine for a dry mill plant for the OH, IL, IN, IA, NE, and SD areas are still positive, so why would any plant not take advantage of this, reagardless of the size of the plant.