Corn-utopia?by alphadawgg on May 21st, 2008 at 6:55 pm |
Since I used to live in the corn belt many years ago, and owned some crop land, I thought I would offer a few comments about corn and ethanol.
See, this ethanol shit does’t make sense. We are greedily stuffing corn into our automobiles via ethanol, while much of the world is facing starvation. What’s wrong with that picture?
When I was a little kid, my mom used to tell me to eat all my broccoli because children were starving in India. I often thought, “what the fuck do I care?” (even though I didn’t know what “fuck” meant.)
I have news. The same thing goes for U.S. consumers. Joey-Loves-His-SUV could give a shit. As long as he can get his gas cheaper with ethanol in it, the rest of the world can starve. (Disclosure: that is not my attitude).
Corn = energy. Are corn prices going higher? As they say in Minnesota and Fargo, ND–”You betcha”. (btw, if you haven’t seen the movie “Fargo”, you ought to rent it. Fucking hilarious, in a morbid sort of way)
Corn is both food and energy. The market values it on that basis.
With oil at $133 / bbl, the market is valuing oil at the equivalent of about $0.023 per thousand BTUs. On the other hand, when corn is converted into ethanol, and assuming a $0.023 per thousand BTUs equivalent, that puts the price of corn at $8.00 per bushel (factoring in the $0.51 per gallon subsidy for ethanol).
Another reason why ethanol doesn’t make sense: When you consider the average yield of corn per acre, the input costs for fertilizer, a conversion rate of 2.50 gals / bushel, and the amount of energy used in the conversion process, including energy usage embodied in farm machinery, there is a NET ENERGY LOSS. But hey, it’s good for Joe Farmboy!
In addition, companies like (MRO: 45.07 -0.90%) have some incentives right now to blend corn-based ethanol with gasoline, whether or not there are subsidies or Federal mandates–when they feel like it. With ethanol around $2.50 / gal, it’s much cheaper than wholesale gasoline, currently over $3. Sorry, no more regular gas. It’s not profitable.
In conclusion, I would not be buying ethanol stocks. What are some of the risks? Well for one thing, if our government had the balls to say, “fuck you Joe Farmboy, no ethanol subsidies”, we could see ethanol stocks go to zero, much to the chagrin of Junior Sample.
Of course, the farmers could retort with, “fuck you FDA, we’re spiking your hamburger with cowshit”. So, subsidies will not disappear anytime soon, due to all the fat-ass bureaucrats.
However, it appears that corn prices will remain fairly high. I expect corn to spike to over $8 this summer. It’s priced into the ethanol stocks right now.
Disclaimer: This information is not intended to be used as the primary basis of investment decisions. Because of individual investors requirements, it should not be construed as advice designed to meet the particular investment needs of any investor. Consult your financial advisor prior to taking any actions. The information and opinions contained here are those of the author and are not necessarily the same as those of iBankCoin, its principals or its affiliates. The author has no positions, long or short, in ethanol stocks. Trade at your own risk.
My Mom used to say the same thing. I think every Mom in the USA must have used that line to get their kids to clean their plates.
What did mothers in India tell their kids?
May 21st, 2008 at 7:08 pm…probably that their kids should go to college and become computer geeks, start a company, bring it public and outsource the call service back to India.
May 21st, 2008 at 7:17 pmWell said Alpadog, well said.
Long corn
May 21st, 2008 at 7:43 pmGuzzle up your Ethonol Joey-loves-his-SUV’s Escalade, there are kids starving in India!
May 21st, 2008 at 8:40 pmnice post, alpha.
May 21st, 2008 at 9:49 pmAlpha, Fargo is a Cohen (sp?) brothers film, same as No Country for Old Men.
Good post.
I’m short DBA. It is a trade based on technicals and intuition.
My intuition says, “No way the fucking farmers keep getting rich. Something will happen to them (as always) and they will get kicked in the nuts.”
May 21st, 2008 at 10:07 pmWoody, “No Country for Old Men” had the same feel to it as Fargo. Bizarre. I liked them both.
May 21st, 2008 at 11:12 pmAll Coen Brothers movies have the same “feel” — it’s an auteur thing. Like Hitchcock movies, or Woody Allen movies, or, to some extent, even Spielberg movies.
The Coen Brothers are so big now, that towns across the country have “Lebowski Fests” in honor of the movie The Big Lebowski.
My favorite Coen Bros is actually their musical — Oh Brother Where Art Thou? Loosely based on Homer’s Odyssesy. I’m classical like that, I guess.
_
May 22nd, 2008 at 10:52 amsimply no words for how great the coen brothers are.
when i saw “raising arizona” at the movies when it came out, i literally had tears gushing out of my eyes, i was laughing so hard.
fucking genius.
May 22nd, 2008 at 11:15 am“O Brother…” is also my favorite…great music. Also loved “Fargo”…go figure…might’ve had something to do with my Norsky heritage.
Ethanol is a freakin’ joke. Check out how it canNot be transported and why. Then tell me that you really want to put that stuff in your engine.
May 22nd, 2008 at 1:26 pmI also think Ethanol is a big fuckin joke. For one it’s not much cheaper at the pump. More importantly if you compare miles per gallon it’s less then petrol. It also burns hotter which can’t be good for an engine. They say they have accounted for this with better gaskets, etc. but we shall see after it gains popularity and more people buy it if their engines hold up as long. I realize it’s about alternative energy and less dependence on foreign oil, but with prices rising across the board for pretty much everything the consumer is forced to look for the best value for their dollar and I don’t know if it’s ethanol. If they can just figure out to keep a hydrogen powered car from blowing up in a crash maybe we can finally get somewhere.
May 22nd, 2008 at 2:24 pmEthanol’s a joke because it takes more energy to make it than what it provides.
The “greens” should be jumping up an down about this, but they’re far too clueless.
May 22nd, 2008 at 2:34 pmBack when I was posting on Yahoo, somebody asked me what I thought about ethanol (Bush had just given it a brief mention in his 2006 State of the Union).
I looked at my Jan 30, 2006 response, and would say pretty much the same thing today:
I know little about the ethanol business, but I am fairly confident about two things:
1) government programs to support ethanol are really just farm-support programs, so you can count on good political support for ethanol.
2) because high oil prices and ethanol are in the headlines, you can count on the appearance of some ethanol stock scams–especially in the .OB and .PK arenas.
I have to disagree with Jake’s knee-jerk dismissal of “the greens” on this issue.
There are clueless masses on all sides of most issues - people who respond to things on the basis of internal beliefs that are well protected from contrary factual information (Oil = bad, so ethanol good; Gore = bad, so global warming is a scam).
But if you look at the leaders and researchers in the alternative energy arena, there is no love for corn-based ethanol. At best, some might tolerate it as a means of keeping the downstream infrastructure in place for future distribution of ethanol from cellulose. The leading researchers in the labs aren’t wasting their time on corn and the leading researchers on the economic and policy and social issues related biomass energy aren’t wasting their time arguing in favor of corn.
May 22nd, 2008 at 4:34 pmEveryone forgets, Methyl tertiary butyl ether (MTBE) additives to gasoline was polluting our ground water and was found to be a potential cancer bomb.
After knowing this, the Government quickly replaced it with Ethanol.
How quickly you morons forget, or never knew.
Ethanol is great. Fuck corn. And, by the way, it won’t give you cancer.
May 22nd, 2008 at 4:41 pmI wrote this on the Yahoo board back in August 2005:
1) IMO, ethanol fuel requirements are just agricultural subsidies in another form. Subsidies can be turned on and off like a switch. If the Presidency changes parties in 2008, I expect that the EPA then will allow California to stop using ethanol in gasoline.
California wanted to try and meet the EPA requirements without shipping corn squeeze by truck from the midwest. The EPA wouldn’t let them opt out. It wasn’t a science-based decision on EPA’s part.
May 22nd, 2008 at 5:17 pmHere’s one of the news stories about California suing to force EPA to approve a waiver of the ethanol requirement:
http://pubs.acs.org/cen/topstory/7934/7934notw4.html
Just for Jake:
“EPA simply ignored the voluminous information we sent them showing that ethanol does nothing to clean the air and actually increases air pollution,” Davis says.
Several environmental groups back California’s stance.
May 22nd, 2008 at 5:22 pmGreens want you riding horses.
With corked asses, of courses.
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Global warming is not a scam. Playing on human’s natural hubris to make them believe they can something about it is.
May 22nd, 2008 at 5:43 pmFuck corn based ethanol, its the biggest fucking scam ever and yet we still line the pockets of gay farmers everywhere:
http://www.youtube.com/watch?v=j9QQcP_Y1II
May 22nd, 2008 at 9:42 pmIs that a toupee on Stossel’s upper lip?
May 23rd, 2008 at 12:00 amNo, it’s one of them “40’s-era Errol Flynn” mustachios. All he needs is a porkpie hat with a press pass sticking out of the band and he’ll be set.
Seriously, what is with the desire to sport a mustache in this day and age?
May 23rd, 2008 at 12:34 am