Andersons Inc. (ANDE)

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  • commenter
    ajstocks
    Jun 30 11:47 AM
    Ethanol Is Dead: How You Can Still Profit From It [view article]
    Corn ethanol is constantly bashed for its energy value. Here are some numbers from a talk given by Michael Wang from Argonne National Labs at the National Press Club in Aug. 2005. He cites 21 studies on the energy value of corn based ethanol; 12 show a positive energy balance, i.e. more energy obtained from the corn than energy used to process the corn. The other 9 show a negative energy balance. Of these, 4 are by Pimental who has railed against corn ethanol for years. Argonne uses the GREET model which is a "well to wheel" analysis and they get the same negative energy balance if they use Pimental's assumptions. This model is available in the public domain at www.transportation.anl.../

    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?     Reply
  • commenter
    Subsidy Eye
    Jun 30 10:48 AM
    My Website
    Ethanol Is Dead: How You Can Still Profit From It [view article]
    CORRECTION AND MISSING LINKS:

    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...     Reply
  • commenter
    Subsidy Eye
    Jun 30 10:38 AM
    My Website
    Ethanol Is Dead: How You Can Still Profit From It [view article]
    Funny how the pro-biofuel commentators here assume that those asking the hard questions are know-nothings. They clearly think we're stupid. Enes K. writes:

    <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&...     Reply
  • commenter
    paulk8756
    Jun 30 10:37 AM
    Ethanol Is Dead: How You Can Still Profit From It [view article]
    Sensible post, Tom.

    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.     Reply
  • commenter
    Tom B
    Jun 30 09:35 AM
    Ethanol Is Dead: How You Can Still Profit From It [view article]
    Food (Corn)-based ethanol is for morons. It has been known for years that you use more energy making it than you get out. I defer judgment on exotic ethanol production methods-- switchgrass etc. Investing in corn-ethanol-- a scientifically doomed endeavor-- is "bubble" investing. The Brazil/ sugarcane process might not translate to the US at all and might be totally unsustainable-- aren't they having huge deforestation/clear cutting issues in the rain forest?

    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.     Reply
  • commenter
    paulk8756
    Jun 30 08:36 AM
    Ethanol Is Dead: How You Can Still Profit From It [view article]
    King Corners,

    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!     Reply
  • commenter
    jcg
    Jun 30 08:05 AM
    Ethanol Is Dead: How You Can Still Profit From It [view article]
    and I am sure the american people would like to see another .60 cents per gallon added to the cost of gas...without ethanol gas would be 15% higher...these journalist fail to do proper research or are being paid by big oil to continue printing these biased and uninformative articles...its a shame. Reply
  • commenter
    avcacio
    Jun 29 11:01 PM
    Ethanol Is Dead: How You Can Still Profit From It [view article]
    Subsidy Eye - Here is a recent post (you asked for), on the Angry Bear blogspot concerning (vs) your "alarmist" post about how corn ethanol has caused the price of corn to go up by 50%... as you quoted...

    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.     Reply
  • commenter
    ALMIR
    Jun 29 10:45 PM
    Ethanol Is Dead: How You Can Still Profit From It [view article]
    I will take this opportunity to add some useful words about Brazilian bio-fuels.

    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...
     Reply
  • commenter
    Enes K.
    Jun 29 08:53 PM
    Ethanol Is Dead: How You Can Still Profit From It [view article]
    Many of you should consider the facts of ethanol besides throwing around opinions. Corn used in ethanol is not sweet corn. It is field corn, which cannot be eaten by people. It is fed to cattle. 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.

    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.     Reply
  • commenter
    samb
    Jun 29 08:32 PM
    Ethanol Is Dead: How You Can Still Profit From It [view article]
    I wonder if i can pull a trailer behind my electric car ??? Reply
  • commenter
    paulk8756
    Jun 29 07:40 PM
    Ethanol Is Dead: How You Can Still Profit From It [view article]
    Bud,

    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!     Reply
  • commenter
    paulk8756
    Jun 29 07:36 PM
    Ethanol Is Dead: How You Can Still Profit From It [view article]
    GT,

    Well said!     Reply
  • commenter
    GTDacula
    Jun 29 02:03 PM
    Ethanol Is Dead: How You Can Still Profit From It [view article]
    The comments on this article highlight the fact that there is a tremendious lack of clear facts available for people to make decisions about. Ethanol as many have said is a good direction for the US to move given our need for fuel to reduce crude consumption. However corn ethanol is not an ideal input for ethanol production. It's yield to cost is too low compared to other options (sugar, wood, grass, etc). The Ag lobby has done a great job of driving this focus on corn ethanol but this focus needs to move to higher yield inputs and we should use corn to feed the hungry in our country and others. The solution is not one silver bullet, success will be built on an overall plan that uses a combination of many technologies; including added oil exploration in the US and offshore, nuclear power, wind, solar, ethanol and mostly conservation. it really doesn;t matter if we have reached "peak oil" or not the price will remain high given the world turmol driven by the huge $'s associated with crude production and the growing demand in the BRIC countries for the longer term. Reply
  • commenter
    BudH
    Jun 29 01:45 PM
    My Website
    Ethanol Is Dead: How You Can Still Profit From It [view article]
    We have corn ethanol, get used to it. It may have gotten overdone last year, but as a replacement to MTBE we will have it in our gas for a long time. Reply
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