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Crit40
Posts:2337
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| 05/09/2008 9:22 AM |
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I would beg to differ with you that gasoline is the most efficient means possible to power our cars. It may be the most "convenient" means, but not the most effiicient. It may provide the most profits to our politician's "major" supporters, but not for the public as a whole. We have known for quite some time that there is not an endless supply of oil on this planet. I've heard some experts suggest 40 to 60 years, but who really knows. But rather than focus on alternative energy, our government, yes government continues to sink our tax dollars into energy bills riddled with subsidies to oil companies, and not exploration of alternative energy sources. There is not a plethora of viable alternatives, because it costs money to invent, and I've already explained where that money is going. We have hydrogen powered vehicles. We have electrically powered vehicles. We have just not invested in the infrastructure to mass produce these types of vehicles, meaning rather than gas stations, we will need hydrogen or charging stations.
And I "get it" that the Middle Easterner's will get their money regardless. But 23% doesn't neccessarily have to come from us. |
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Counting the Herd one hoof at a time. |
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egami
Posts:5061
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| 05/09/2008 9:31 AM |
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Posted By Bugeater on 05/09/2008 9:15 AM Posted By egami on 05/09/2008 9:05 AM
Ethanol IS an alternative source of energy. I am not quite sure how you can contend it's not. Sure it is, and so is the methane gas from my beer farts. The key word here is "viable", which ethanol isn't.
Ethenol is the MOST viable alternative into moving us into the next phase of renewable energy.
And it does have it's own long term viability as well. |
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Crit40
Posts:2337
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| 05/09/2008 9:35 AM |
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Posted By egami on 05/09/2008 9:05 AM
Ethanol IS an alternative source of energy. I am not quite sure how you can contend it's not.
Ethanol, by itself will not power your vehicle, or at least for very long. Right now, it is primarily a blending agent with gasoline. And the success of ethanol is finding an efficient means to produce it. Our fearless leaders have decided that No. 2 Yellow corn is the answer, and it is not. In actuality, sugar cain is the most efficient. But for corn ethanol plants to be profitable, they need to be buying the corn for not much more than $2.00/bushel. Current cash corn prices are $5.75/bushel; almost 3 times where it needs to be to keep these companies viable. Why is corn $5.75/bu? Because the people that need it to produce ethanol, over built ethanol plants and now the law of supply and demand comes into play. Our corn supply is being depleted by the ethanol industry, which it can't afford to continue buying, without subsidies. How long do you think the ethanol industry in the US is going to last when they continue to lose money; without subsidies that is.
The additional problem with ethanol is that while a lot of cars will run on E85, you have to drive all over the place trying to find a station that sells it.
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Counting the Herd one hoof at a time. |
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Bugeater
Posts:971
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| 05/09/2008 9:36 AM |
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By "efficient", I meant cheapest and most convenient, perhaps it wasn't the best choice of words.
I'm not one to defend our gov't, and I do believe there is corruption and market manipulation going on, but I do have a hard time believing that taxpayers would've been excited about billions being spent on something we didn't need because gasoline was around a $1 a gallon. Not to mention the average person doesn't really give a rat's ass where their money is going anyway, they just want their big-ass cars, trucks and SUVs. If they really gave a sh*t about it they wouldn't buy those vehicles to begin with. What ails us is not so much an energy problem, but a lifestyle problem.
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Bugeater
Posts:971
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| 05/09/2008 9:43 AM |
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Posted By Crit40 on 05/09/2008 9:35 AM
Our fearless leaders have decided that No. 2 Yellow corn is the answer, and it is not. In actuality, sugar cain is the most efficient.
Problem is, we don't have a climate that is conducive to growing sugar cane. I've heard that hemp may be viable, but that's illegal to grow. That may be an instance where our gov't is a fault.
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egami
Posts:5061
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| 05/09/2008 9:50 AM |
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Posted By Crit40 on 05/09/2008 9:35 AM Posted By egami on 05/09/2008 9:05 AM
Ethanol IS an alternative source of energy. I am not quite sure how you can contend it's not. Ethanol, by itself will not power your vehicle, or at least for very long. Right now, it is primarily a blending agent with gasoline. And the success of ethanol is finding an efficient means to produce it. Our fearless leaders have decided that No. 2 Yellow corn is the answer, and it is not. In actuality, sugar cain is the most efficient. But for corn ethanol plants to be profitable, they need to be buying the corn for not much more than $2.00/bushel. Current cash corn prices are $5.75/bushel; almost 3 times where it needs to be to keep these companies viable. Why is corn $5.75/bu? Because the people that need it to produce ethanol, over built ethanol plants and now the law of supply and demand comes into play. Our corn supply is being depleted by the ethanol industry, which it can't afford to continue buying, without subsidies. How long do you think the ethanol industry in the US is going to last when they continue to lose money; without subsidies that is. The additional problem with ethanol is that while a lot of cars will run on E85, you have to drive all over the place trying to find a station that sells it.
Having worked with and for manufacturers of biodiesel and ethanol I am pretty well aware of the capabilities and limitations of each.
You said it is not an alternative source of energy and that statement alone simply is not true.
And also, your numbers you are using are fixed. It depends on the ethanol, biodiesel plant and where they are at financially that dictates what the cost of corn needs to be for them to make it profitably and having worked on their internal systems, specifically software that controls their internal hedging and margins, those numbers you provided are very misleading because contracting commodity prices and bulk purchasing play a large part in the input and output margins.
Most ethanol producers right now, with subsidies, can tolerate corn prices fine because your numbers you are using seem be largely ethenol centric and ignoring the byproduct profit margins that offset the higher corn prices.
In short, the profitability of ethanol isn't solely linked to the CBOT corn prices. By and large if corn is $2.00/bu or $5.00/bu ethanol doesn't have as major cost inhibitors as what some biased sites would lead one to believe.
Also, as far as corn supply, do have ANY idea how much CRP ground we could convert over to corn production? Land in general in the US? We could multiply the corn output in the US tremendously if the need and desire was there.
The problem is that people want to take away and discourage subsidies to the farmers. When, in fact, ethanol and biodiesel are the perfect stepping stones to the next era of renewable fueling.
We aren't going to go renewable overnight. It's going to take decades of infrastructure turnover to get off foreign oil significantly. You can't just thrust billions of dollars of infrastructure out there to do it overnight, so in the meantime you need that stepping stone.
And, did I hear you tout eletric energy as an alternative? Not a chance you could replace the bulk of oil burning infrastructure with electricity.
As hot as the "electric" cars are and "hybrid" technology is in general there is still a huge gap there, and at the end of the day all you are doing is cost-shifting energy from oil to what? Coal, or some other source to produce the electricity.
Again, decades of infrastructure changes to make it viable.
So, it's laughable to suggest ethanol and biodiesel aren't viable...they are THE most viable in getting us to the new era of renewable energy. |
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Crit40
Posts:2337
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| 05/09/2008 9:51 AM |
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Hemp and switch grass.....there are certainly other alternatives, but who is going to talk the farmers into raising switch grass when they are grossing $1,035/acre raising corn? Especially when just a few short years ago they were grossing $340/acre raising the same crop.
I'm telling you our "ethanol policy" as it stands, cannot and will not survive. |
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Counting the Herd one hoof at a time. |
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Fergie
Posts:377
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| 05/09/2008 9:55 AM |
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Please gentleman, (especially you egami) let's be realistic. If you had such passionate convictions and any where-with-all in reality.
You wouldn't be spewing your guts on here as if you are piecing together your next column for print.
Let it be, let it be, let it be, yea, let it be. |
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Crit40
Posts:2337
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| 05/09/2008 10:21 AM |
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I guess I don't understand what you mean by "where the ethanol or biodiesel plant is financially" that dictates what they can pay for corn to make it profitable for them. A company's balance sheet doesn't dictate profitability. It's their production costs and sales that dictates profitability. A company that is sitting strong financially may be able to "hold-on" during periods of rising production costs, but that doesn't mean they are more profitable than the next company. It merely means that they can afford to absorb the losses, due to a strong balance sheet. But shareholders aren't going to let that happen too long, as with the deterioration of the balance sheet equity, so too goes their investment.
As for byproduct, the primary byproduct of ethanol is corn gluten, which is fed to livestock, although I know there are other smaller byproducts as well, such as corn oil. The problem with gluten is that the ethanol industry is driving up feed costs for cattle and hog producers. High corn prices and high gluten costs, means the cattle feeders aren't making money either. Hog producers do not feed corn gluten, but they cannot survive feeding $5.75 corn. So there's your major market for your byproduct.
Also, if ethanol is immune to high corn prices, as you suggest they are through hedging, then why so many plants closing, halting production and stopping construction of plants in process?
BTW, personally, I think harvesting wind energy (something we'll never run out of) for your electricity is a much more viable aternative over coal.
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Counting the Herd one hoof at a time. |
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egami
Posts:5061
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| 05/09/2008 11:53 AM |
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Posted By Crit40 on 05/09/2008 10:21 AM
I guess I don't understand what you mean by "where the ethanol or biodiesel plant is financially" that dictates what they can pay for corn to make it profitable for them.
Because older, established plants that have their assets paid off are in a less volatile position.
And what many (most) anti-ethanol people are doing is publishing the most volatile numbers for the public to evaluate.
A company's balance sheet doesn't dictate profitability. It's their production costs and sales that dictates profitability.
I understand that...that's why I used my example of working with hedging software and not the accounting side.
A company that is sitting strong financially may be able to "hold-on" during periods of rising production costs, but that doesn't mean they are more profitable than the next company.
I fully understand that...and your comments are largely lumping in ethanol producers as a whole when the fact is that many of these plants are on unequal ground in terms of their ability to acquire input commodities and sell of byproducts.
And, Crit, I can tell you that practically every site I've seen spouting off numbers are completely ignoring a lot of critical factors driving the bottom number, the number that it costs to generate that gallon of ethanol. Because THAT'S the number that matters. And it can differ quite a bit from plant to plant.
It merely means that they can afford to absorb the losses, due to a strong balance sheet. But shareholders aren't going to let that happen too long, as with the deterioration of the balance sheet equity, so too goes their investment.
As for byproduct, the primary byproduct of ethanol is corn gluten, which is fed to livestock, although I know there are other smaller byproducts as well, such as corn oil. The problem with gluten is that the ethanol industry is driving up feed costs for cattle and hog producers.
High corn prices and high gluten costs, means the cattle feeders aren't making money either. Hog producers do not feed corn gluten, but they cannot survive feeding $5.75 corn. So there's your major market for your byproduct.
Welcome to reality...when one commodity starts being used in lieu of another...supply and demand will dictate value.
Going "green" is going to cost us, Crit. It's going to cost us in infrastructure, it's going to drive commodity prices up and that's the way it's going to be, period. There is no getting around food costs and other things going up. If we leave oil behind we HAVE to pay the price.
And, no China and Europe aren't going to care about funding oil as Bugs established.
The beauty of free market enterprise and capitalism is that society will adjust.
Also, if ethanol is immune to high corn prices, as you suggest they are through hedging, then why so many plants closing, halting production and stopping construction of plants in process?
I never stated, or suggested such. However, a large part of the problem is exactly what I stated prior...essentially many got in to the game too late and can't pay off their debt and still operate. Older established plants, or plants that worked a deal with builders on a share basis versus a straight capital basis, have an distinct advantage.
Like I said, for many reasons yours, and many others, mass lumping these plants all together is an unfair pictorial of the truth behind the story.
BTW, personally, I think harvesting wind energy (something we'll never run out of) for your electricity is a much more viable aternative over coal.
Personally, I am for nuclear over wind for numerous reasons, infrastructure, maintenance and bottom line costs, but my point still stands that nothing can swoop in and replace oil completely in the next 20 to 30 years, we need that stepping stone of ethanol and biodiesel as we wean ourselves off of oil-based infrastructure.
And, yes, if we wanted to there is a viable, long term solution for ethanol as well, but I'll just leave it at that.
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Crit40
Posts:2337
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| 05/09/2008 2:46 PM |
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My opinion is that the industry as a whole, is not sustainable long term, unless we place a moratorium on ethanol subsidies. And you are absolutely correct in stating that those companies/cooperatives that have been in the game longer and implimented a strong risk management plan by booking corn years into the future when the prices were lower or hedged via call options will be able to survive the short run, but eventually, they will be buying higher priced corn and producing at a loss, which will errode equity and make it unsustainable in the long run.
The question I have asked over the last several years is that if this were such a great long term investment, why are the BP's and the Exxons not in the ethanol game?
And I too favor nuclear power, although I think to expand that infrastucture is more cost prohibitive in the short run, while wind power would not be. I certainly think that both are viable alternatives for electrical production. |
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Counting the Herd one hoof at a time. |
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egami
Posts:5061
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| 05/09/2008 3:25 PM |
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The other major factor that weighs into ethanol, and especially biodiesel since it can be run 100% in place of diesel and isn't just an additive, is the price of oil. So, as long as oil remains high, which it will with Chinese demand now, that will automatically hedge against a lot of the pain of inflated corn prices as well. For the REAL crisis to start in the ethanol world we'd have to get back down to $2.50 gas or $50 - $75/barrell oil and we aren't seeing those days ever again.
BP claims to be investing in alternative fuel development. That's what their commercials say. So, who knows what they are investing in, but the main difference I see in the industries is that BP and Exxon aren't in a position to jump in and get the market share in renewables that they have now in oil, so actually I fully expect them to continue their campaign against progressing us toward renewables for that reason alone. Once we switch infrastructure away from oil their end is starting.
Also, there are fundamentally different mechanisms in the way the commodities are sold that aren't attractive to oil people. For instance, you can't artificially inflate the grain markets like you can the oil markets by putting in bids and then pulling them before they fill.
As far as nuclear versus wind, any research I've done suggests that nuclear, while having higher startup costs, has more consistent output and less long term maintenance. It also seemed that dollar for dollar you get more power from nuclear over the long term, but frankly...there is no reason both can't be implemented and wind is much more friendly to small co-operative ownerships and I like that aspect versus a few major power companies controlling pricing. |
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Crit40
Posts:2337
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| 05/09/2008 4:10 PM |
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The other major factor that weighs into ethanol, and especially biodiesel since it can be run 100% in place of diesel and isn't just an additive, is the price of oil. So, as long as oil remains high, which it will with Chinese demand now, that will automatically hedge against a lot of the pain of inflated corn prices as well. For the REAL crisis to start in the ethanol world we'd have to get back down to $2.50 gas or $50 - $75/barrell oil and we aren't seeing those days ever again.
You definitely have a point with reference to oil prices, although the problem is that gasoline and ethanol are not mutually related as far as pricing. I know early on, since ethanol was not a commodity that could be hedged against, a lot of ethanol companies were hedging against unleaded gasoline futures, which didn't necessarily work.
As I stated earlier in this thread, a significant reason, IMO, for the higher oil prices and in a sense our higher corn prices is our weak dollar. When the dollar gains strength against other world currencies, there will be less demand for our exported corn and oil prices will fall, although probabaly not as significantly. We do have to remember that oil prices were $86/barrell as recently as January of this year, and a lot of this is predicated on the state of the US economy as a whole.
But ethanol production certainly has a vested interest in oil prices staying high as well as the blending subsidy, at least at the current price of corn anyway. |
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Counting the Herd one hoof at a time. |
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IrememberDukester
Posts:2039
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| 05/09/2008 9:34 PM |
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Posted By Bugeater on 05/09/2008 9:36 AM
By "efficient", I meant cheapest and most convenient, perhaps it wasn't the best choice of words.
I'm not one to defend our gov't, and I do believe there is corruption and market manipulation going on, but I do have a hard time believing that taxpayers would've been excited about billions being spent on something we didn't need because gasoline was around a $1 a gallon. Not to mention the average person doesn't really give a rat's ass where their money is going anyway, they just want their big-ass cars, trucks and SUVs. If they really gave a sh*t about it they wouldn't buy those vehicles to begin with. What ails us is not so much an energy problem, but a lifestyle problem.
On this one I most certainly agree with Bugs!
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It's my fault," said first-year Nebraska coach Bo Pelini. "Damn right, yes, I'm embarrassed. I apologized to the team. I apologize to the state of Nebraska. I apologize to everyone associated with Nebraska football.
"It's my responsibility. I was hired to do a job and I didn't do the job, I'm just not a very good coach. |
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