Ethanol and Oil&Corn Prices

[wiseheart]

Hi All,

I bought Verasun Energy (VSE)the beginning of this year at
exactly $17 in anticipation of Bush's speech which involved
supporting ethanol production. The stock shot up to $20
but unfortunately came crashing down again today due to
them posting a loss of $312,000 (0 cents/share) as opposed to an expected profit of 11 cents/share. Apparently, the
loss is due to corn prices and higher than expected costs
on building a new ethanol plant.

I feel dumb, because Im an International Economy major, and
of course knew all about corn prices going up. Im even doing
a report on Ethanol in Brazil, I just had forgot to
correlate that to my stocks. Anyways, my analysis is that
corn prices are going to retreat in the coming year while
oil prices continue to go up this summer and level off
in fall. Im more sure of the corn price, because of the
massive planting that was done this year, which should
cause a rather big surplus assuming crops grow well, and
of course corn prices should drop back down.

Of course, I have no idea how hedged VSE is among other
things. Does anyone have an opinion on the ethanol sector
right and any opinions on short term/long term or just
on corn/oil prices?

Thanks much [img]/images/graemlins/smile.gif[/img]

[dazraf69]

Ethanol is an unrealistic source of fuel. The administration has been pumping the idea of ethanol in order to distance it self from Oil companies in the coming election year. Many presidents prior to Bush have done the same suggesting alternative fuel in their State of the Union address. Much like what you see with solar power (being mostly subsidized by the govt.) ethanol is a short lived fad. This is on a grander scale and does not apply to a specific place like say Brazil where there is a high usage of ethanol. The reality is that oil will be the main source of energy for many generations to come as is obvious in our presence in Iraq, which was a strategic decision to assure a source of fuel for future generations.

This is nothing more than an opinion and should not be used to gauge the value or potential of a particular sector/stock. I would suggest however you do some further research of your own before making an investment in the energy sector. It can be highly volatile/unpredictable. If you do feel that something like ethanol will be a future source of fuel, a better investment if you do not want to do the required research is an index covering the sector.

You might consider the Powershares WilderHill Clean Energy (PBW) exchange-traded fund. This ETF owns stakes in a number of companies developing new types of energy, including Pacific Ethanol. By spreading your bets, you can reduce your risk and increase your exposure to different types of new energy stocks. I am in no way affiliated with this ETF nor do I have any further knowledge outside of the fact it is an energy ETF.

http://finance.yahoo.com/q?s=PBW

[kimchi]

[ QUOTE ]
The reality is that oil will be the main source of energy for many generations to come as is obvious in our presence in Iraq, which was a strategic decision to assure a source of fuel for future generations.



[/ QUOTE ]

Oil can't be the main source of energy for generations to come.

[hlacheen]

I think we alternative energy is definitely going to be a big part of our future, but it's not going to be ethanol. The economics of ethanol are horrible.

[dazraf69]

[ QUOTE ]
[ QUOTE ]
The reality is that oil will be the main source of energy for many generations to come as is obvious in our presence in Iraq, which was a strategic decision to assure a source of fuel for future generations.



[/ QUOTE ]

Oil can't be the main source of energy for generations to come.

[/ QUOTE ]

I would say oil will be the main source of fuel for at least the next 50 yrs but more like 100yrs. Pure speculation, I also feel that oil companies will take the forefront in new fuel. They have there resources, capital and initiative to create a new fuel when oil no longer becomes abundant. Why would a company that is so profitable like say Exxon not secure its own future in alternative fuel if oil was going to be gone within the next generation? I can imagine a stockpile of alternative solutions to our energy problems stored away in some cabinet in a safe locked away in a forgotten place. Ideas that were likely bought out in order to insure oil was profitable. Something about a carburator that could run 1000 miles a gallon? [img]/images/graemlins/grin.gif[/img]

[onlinebeginner]

dazraf69

you r right

[kimchi]

[ QUOTE ]

I would say oil will be the main source of fuel for at least the next 50 yrs but more like 100yrs.

[/ QUOTE ]

Unless people allow the world economy to contract over the next 100 years, I doubt oil will remain as the main source of energy.

Oil drives the world economy and production has just about peaked. There will no longer be cheap energy while oil is the main energy producer. Until a suitable replacement is found, ecenomic growth will be stunted by prohibitively sky-high energy costs.

Wide-spread usage of bio fuels will result in mono-culture ecological disaster and the stipping of the Earth's top-soil. The US government FULL well knows this...but hey, it's a vote winner.

Maybe turn the entire Sahara into one rather large solar panel?

[hlacheen]

But where will the gazelle graze?????

[kimchi]

[ QUOTE ]
But where will the gazelle graze?????

[/ QUOTE ]

Not much pasture in the desert at the moment.

[Brad1970]

[ QUOTE ]
Hi All,

I bought Verasun Energy (VSE)the beginning of this year at
exactly $17 in anticipation of Bush's speech which involved
supporting ethanol production. The stock shot up to $20
but unfortunately came crashing down again today due to
them posting a loss of $312,000 (0 cents/share) as opposed to an expected profit of 11 cents/share. Apparently, the
loss is due to corn prices and higher than expected costs
on building a new ethanol plant.

I feel dumb, because Im an International Economy major, and
of course knew all about corn prices going up. Im even doing
a report on Ethanol in Brazil, I just had forgot to
correlate that to my stocks. Anyways, my analysis is that
corn prices are going to retreat in the coming year while
oil prices continue to go up this summer and level off
in fall. Im more sure of the corn price, because of the
massive planting that was done this year, which should
cause a rather big surplus assuming crops grow well, and
of course corn prices should drop back down.

Of course, I have no idea how hedged VSE is among other
things. Does anyone have an opinion on the ethanol sector
right and any opinions on short term/long term or just
on corn/oil prices?

Thanks much [img]/images/graemlins/smile.gif[/img]

[/ QUOTE ]

Don't expect corn prices to go down very much over the next few years. As long as the US stays in Iraq & the price of oil stays sky high...ethanol will be pushed as alternative to curb our foreign oil usage. Corn & other grains such as grain sorghum & soybeans will also benefit in price.