Corn Futures Up, Ethanol Stocks Down
What bad luck for U.S. ethanol makers. The very day when oil hits a record high, even when adjusted for inflation, corn also hits a record high. High oil should make ethanol more desirable, but the high corn prices are more than offsetting any benefits from the oil rally.
As a result, some corn ethanol stock are at or near their own records - well, record lows. Verasun Energy (VSE) posted its lowest close ever of $7.75 Tuesday, 66 percent down from its offering price of $23 a share. U.S. BioEnergy (USBE) fell to $6.19, also a low point, and 43 percent down from its IPO price of $14.
But there’s a morsel of good news for ethanol makers. Corn prices fell back 2 percent Wednesday amid expectations that animal-feed consumption will taper off in the U.S. and demand for corn abroad will also slow.
Nearly all of the ethanol stocks bounced back Wednesday by two or three percent. That’s really not much considering that some, like Verasun and U.S. BioEnergy, were suffered double-digit declines when corn hit its record high. There may be some investors looking to get in on what they believe are bargains. But it’s still not clear what when these companies’ operations will recover, and why.
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This site about power resources in any possible way.
We found an interesting article about the problems with Ethanol on ConsumerReports.org:
http://blogs.consumerreports.org/cars/2008/03/ethanol-e85.html
“But there are some problems with increasing ethanol blends. Ethanol contains less energy than gasoline, so increasing the amount of ethanol in gasoline will likely result in lower fuel economy. Increasing standard fuel blends from zero to 10 percent ethanol, as is happening today, has little or no impact on fuel economy. In tests, the differences occur within the margin of error, about 0.5 percent. Further increasing ethanol levels to 20 percent reduces fuel economy between 1 and 3 percent, according to testing by the DOE and General Motors. Evaluations are underway to determine if E20 will burn effectively in today’s engines without impacting reliability and longevity, and also assessing potential impact on fuel economy.”
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