Re: OT: Ethanol Investors?

Posted by MarkB_MI on September 03, 2006 at 08:07:30 from (64.31.11.43):

In Reply to: OT: Ethanol Investors? posted by Rauville on September 03, 2006 at 06:48:52:

With so many big companies building ethanol plants, it seems unlikely that the small plants will be able to survive. Currently demand for ethanol is high, but it seems to me that ethanol demand is fairly inelastic. Meaning that once supply exceeds demand, prices will nosedive. The only advantage that small producers have is that they MAY be able to keep their costs low enough to stay profitable. Other than that, the big producers hold all the cards.

Some problems with ethanol economics:

1. Currently, ethanol production is heavily subsidized by a 52 cent per gallon tax credit paid to gasoline producers who add it to gasoline. Take away the tax credit and the economics change significantly. And Congress will have a hard time justifying the tax credit when ethanol production is a thousand times what it is today.

2. Ethanol, unlike petroleum, is generally only shipped by truck. This makes it uneconomical to transport large amounts of ethanol long distances, at least until there is enough demand for ethanol to justify building a pipline infrastructure for ethanol.

3. One reason ethanol is reasonably cheap to produce is that corn is, for all intents and purposes, free. However, the same conditions that will increase ethanol demand (namely high fuel prices) will also drive up the price of corn. This is likely to put the squeeze on ethanol producers who will be faced by high grain prices on one side and price competition from other producers on the other side.

Like most other new industries, there will be a few companies who make big profits early on, while in the end most will be absorbed or put out of business by the big producers.

Replies:

• Re: OT: Ethanol Investors? john in la 10:37:49 09/03/06 (2)
  • Re: OT: Ethanol Investors? MarkB_MI 11:16:19 09/03/06 (1)
    • Re: OT: Ethanol Investors? Leland 22:02:52 09/03/06 (0)

Add a Reply Name: E-Mail: Subject: Comments: Optional Link URL: Link Title: Optional Image URL: Email Notification: If you check this box, email will be sent to you whenever someone replies to this message. Your email address must be entered above to receive notification. This notification will be cancelled automatically after 2 weeks.

TRACTOR PARTS	TRACTOR MANUALS

We sell tractor parts!  We have the parts you need to repair your tractor - the right parts. Our low prices and years of research make us your best choice when you need parts. Shop Online Today. [ About Us ]