Surging ethanol prices hit two-month high

Houston Chronicle ^ | Nov. 11, 2006 | BN

[thackney]

U.S. ethanol prices have risen to their highest point in almost two months, extending a rally amid surging corn costs and higher demand for the gasoline additive.

Corn prices have climbed almost 50 percent since the start of September after hot, dry weather in July damaged the U.S. crop, and ethanol production rose to a record. Corn futures reached a 10-year high in Chicago futures trading recently. Most ethanol in the U.S. is made from the grain.

"Corn has gone up so dramatically in just the last six weeks that I think some of the ethanol producers either had to raise their prices or cut some production," said consultant Andy Lipow, president of Lipow Oil Associates in Houston.

Ethanol averaged $2.22 a gallon as of Friday, up 1.4 percent from $2.19 on Nov. 3, based on data from distributors in Des Moines and other Midwest locations.

It's the highest since Sept. 15.

[Paul8148]

Oh no. The evils of big Corn. H

[ChiMark]

The myth of ethanol. It's not an endless supply.
I heard they can produce about 240 gallon of ethanol per
acre corn. Not too efficient.

[mountainlyons]

Thats not the worst part. You only get 12 miles per gallon which makes it about $4.00 per gallon next to gas.

[Cobra64]

Gee. I didn't know that Halliburton was in the farming business. Or did Cheney and his friends buy vast quantities of Archer Daniels Midland.

[Nathan Zachary]

" You only get 12 miles per gallon which makes it about $4.00 per gallon next to gas."

Then grow soy beans and make bio diesel. Wait, that works out to cost about the same.

Oh well, that's the price you have to pay if you want oil freedom.

[Brad from Tennessee]

Isn't part of this inflation due to U.S. tariffs on Brazilian and other foreign ethanol?

[Born to Conserve]

"Oh no. The evils of big Corn."

Did you know there was a pill that could turn a tank of water into tank of ethanol, but Big Corn bought the patent and destroyed it!

[Youngman442002]

And of course its going to flow down to the cows and pig prices too.....and talk about plowing everything under to plant corn...the enviro's that wanted this ...are going to get every acre planted in corn..so goodbye treed lands..wetlands...marginal lands....deer..Pheasants ..ducks..etc....I love this kind of hypocrisy.....just love it

[Paladin2]

Not quite.

BioDesel has more energy/gal than gasoline and much more than ethanol. In addition, it's possible that an acre of beans makes more gallons of BioDiesel than corn makes Ethanol. Diesel engines are more efficient, so the equivalent price/gal ($/mi) is likely near or better than gasoline.

[TKDietz]

Per acre ethanol production is closer to 400 gallons per acre now. Bushels per acre corn yields have steadily improved over the years to close to 150 bushels per acre and the per bushel ethanol yield for modern ethanol plants has increased to around 2.8 gallons per bushel. Ethanol contains around thirty percent less energy than gasoline. It is much higher octane though and engines can be optimized to more power or better mileage. Mileage will always be better with gasoline though. Most flex fuel cars get around 25% fewer miles per gallon on E85 than they do with regular gasoline, some better, some worse. Manufacturers know these vehicles will mostly burn gasoline and only add E85 compatibility in as an afterthought. Some handle ethanol better than others.

[oceanview]

the specualtors are moving into this market now - this was predicted months ago.

how long before we can't afford to actually EAT corn?

[hlmencken3]

How much of America's corn crop do you think gets eaten as corn?

[oceanview]

I don't know.

but what I do know is - if the price of corn doubles, whatever that number is, its headed to zero. no one HAS TO eat corn, its not like gasoline which every has to buy. I can eat string beans.

[P8riot]

how long before we can't afford to actually EAT corn?

Grow your own. We plant, and eat (with a little help from our friends) a half acre a year.

[hlmencken3]

The corn used to make ethanol is not the same stuff that is bought in a can or that makes tortilla chips.

Most corn feeds livestock, and some is made into corn syrup (which has easy alternatives). Ethanol is made from the corn starch and does not reduce the amount of desirable corn oil, protein and fiber, which would be separated out if the price gets high enough.

[Freedom4US]

Ethanol makers are offering a lot better price, closer to basis, than anyone else. Which way are you going to point the truck!? So, the price of corn goes up.

[philetus]

U.S. ethanol king Archer Daniels Midland

Archer Daniels Midland Company (ADM)
is one of the world’s largest agricultural
processors of soybeans, corn, wheat
and cocoa. We work with farmers across
the world to turn these crops into
soymeal and oil, corn sweeteners, flour,
cocoa and chocolate, ethanol and biodiesel,
as well as a wide portfolio of other value-added
food ingredients, animal nutrition and industrial products.

[philetus]

John Stossel on ADM

The Biggest Piggie?

When public interest groups compile lists of corporate welfare recipients, a company called Archer Daniels Midland (ADM) is usually at the top of the list. You may never have heard of ADM, because its name rarely appears on consumer products, but it’s huge. Its products are in most processed foods.

ADM collects welfare because of two cleverly designed special deals. The first is the government’s mandated minimum price for sugar. Because of the price supports, if a soft drink maker wants to buy sugar for its soda, it has to pay 22 cents a pound -- more than twice the world price. So Coca-Cola (and almost everyone else) buys corn sweetener instead. Guess who makes corn sweetener? ADM, of course. Now guess who finances the groups that lobby to keep sugar prices high?

ADM’s second federal feeding trough is the tax break on ethanol. Ethanol is a fuel additive made from corn, kind of like Hamburger Helper for gasoline, except that it’s more expensive, so no one would buy it if government didn’t give companies that use ethanol a special 52-cent-a-gallon tax break. That costs the treasury half a billion dollars a year. ADM produces half the ethanol made in America.

Why does ADM get these special deals? Bribery. OK, it’s not technically bribery -- that would be illegal. ADM just makes "contributions." Through his business and his family, former ADM Chairman Dwayne Andreas gave millions in campaign funds to both Mondale and Reagan, Dukakis and Bush, Dole and Clinton. President Nixon’s secretary, Rosemary Woods, says Andreas himself brought $100,000 in cash to the White House. He even paid tuition for Vice President Hubert Humphrey’s son. Republicans, Democrats -- it doesn’t matter. ADM just gives.

It also flies people around on its corporate jets. When we contacted Andreas to ask for an interview, he arranged to fly us to ADM’s Decatur, Illinois, headquarters in one of ADM’s jets. I’ve seen private jets before, but ADM’s was a step above. A flight attendant served us excellent food on gold-plated china. The camera crew and I loved it. Bet the politicians like it too.

A limo took us to Dwayne Andreas’ office. Once the cameras were rolling, I brought out the questions about "corporate welfare." I foolishly thought I could get him to admit he was a rich guy milking the system. I thought he’d at least act embarrassed about it. Fuggeddaboutit. He was unfazed.

Stossel: Mother Jones [magazine] pictured you as a pig. You’re a pig feeding at the welfare trough.

Andreas: Why should I care?

Stossel: It doesn’t bother you?

Andreas: Not a bit.

I still wonder why he granted the interview. I asked him about his bribes -- I mean, contributions. For example, Andreas gave the Democrats a check for $100,000. A few days later, President Clinton ordered 10 percent of the country to use ethanol.

[philetus]

John Stossel on ADM

The Biggest Piggie?

When public interest groups compile lists of corporate welfare recipients, a company called Archer Daniels Midland (ADM) is usually at the top of the list. You may never have heard of ADM, because its name rarely appears on consumer products, but it’s huge. Its products are in most processed foods.

http://www.reason.com/news/show/29067.html

ADM collects welfare because of two cleverly designed special deals. The first is the government’s mandated minimum price for sugar. Because of the price supports, if a soft drink maker wants to buy sugar for its soda, it has to pay 22 cents a pound -- more than twice the world price. So Coca-Cola (and almost everyone else) buys corn sweetener instead. Guess who makes corn sweetener? ADM, of course. Now guess who finances the groups that lobby to keep sugar prices high?

ADM’s second federal feeding trough is the tax break on ethanol. Ethanol is a fuel additive made from corn, kind of like Hamburger Helper for gasoline, except that it’s more expensive, so no one would buy it if government didn’t give companies that use ethanol a special 52-cent-a-gallon tax break. That costs the treasury half a billion dollars a year. ADM produces half the ethanol made in America.

Why does ADM get these special deals? Bribery. OK, it’s not technically bribery -- that would be illegal. ADM just makes "contributions." Through his business and his family, former ADM Chairman Dwayne Andreas gave millions in campaign funds to both Mondale and Reagan, Dukakis and Bush, Dole and Clinton. President Nixon’s secretary, Rosemary Woods, says Andreas himself brought $100,000 in cash to the White House. He even paid tuition for Vice President Hubert Humphrey’s son. Republicans, Democrats -- it doesn’t matter. ADM just gives.

It also flies people around on its corporate jets. When we contacted Andreas to ask for an interview, he arranged to fly us to ADM’s Decatur, Illinois, headquarters in one of ADM’s jets. I’ve seen private jets before, but ADM’s was a step above. A flight attendant served us excellent food on gold-plated china. The camera crew and I loved it. Bet the politicians like it too.

A limo took us to Dwayne Andreas’ office. Once the cameras were rolling, I brought out the questions about "corporate welfare." I foolishly thought I could get him to admit he was a rich guy milking the system. I thought he’d at least act embarrassed about it. Fuggeddaboutit. He was unfazed.

Stossel: Mother Jones [magazine] pictured you as a pig. You’re a pig feeding at the welfare trough.

Andreas: Why should I care?

Stossel: It doesn’t bother you?

Andreas: Not a bit.

I still wonder why he granted the interview. I asked him about his bribes -- I mean, contributions. For example, Andreas gave the Democrats a check for $100,000. A few days later, President Clinton ordered 10 percent of the country to use ethanol.

[TKDietz]

"In addition, it's possible that an acre of beans makes more gallons of BioDiesel than corn makes Ethanol."

What kind of beans? Soybeans produce enough oil to make not much more than 40 gallons of biodiesel per acre, compared to nearly 400 gallons of ethanol per acre with corn.

[TKDietz]

Crop subsidies these days are tied to the market price of the produce. One good thing about ethanol is that if we keep increasing ethanol production like we are it will eventually drive the price of agricultural produce higher and reduce the amount of crop subsidies being paid. People won't like paying a little more for food, but at least we won't be paying out so much in subsidies to farmers and flooding the world markets with subsidies agricultural products. The Mexicans have been complaining like crazy about our corn that gets sold there cheaper than they can grow it themselves. Maybe if their farmers could make a buck, or a peso, not so many Mexicans would come here looking for work.

[TKDietz]

"...subsidies agricultural products."

Should say "subsidized agricultural products."

[philetus]

One good thing about ethanol is that if we keep increasing ethanol production like we are it will eventually drive the price of agricultural produce higher and reduce the amount of crop subsidies being paid."

The $6.55 billion omnibus measure (The Emergency Farm Relief Act of 2006, S. 3855) provides hundreds of millions of dollars for projects and programs completely unrelated to crop and livestock losses associated with drought and hurricanes.

Among these extras, there is a subsidy bonus of $1.5 billion in "energy assistance" directed exclusively to subsidized crop farmers who collected over $22 billion from taxpayers in 2005 and will receive billions more this year.

http://www.ewg.org/issues/agriculture/20060926/index.php

[Paladin2]

One bushel of soybeans produces about 1.5 gallons of soy diesel. Soybeab yield: 40 to 56 bu/acre (per MN ag website). That would be 80 to 100 gal/acre (plus you still get the soybean meal).

Ethanol plants now produce ethanol at 2.7 gallons/bushel. Corn yield: 180bu/acre --> 486 gal.

Gasoline equivalent:

Ethanol 325 eq gal. / acre

Diesel (from beans) 105 eq. gal. /acre (assumes use in a Turbo DI diesel)

Diesel from Rapeseed: 154 eq gal. So corn makes more equivalent fuel/acre, but soybeans have an additional output to consider against whatever is done the residual of corn squeezings.

[Jackson Brown]

Both you points are DEAD ON!!

1 -- there is not enough land to grow enough corn to make any real difference in supply -- or -- price. Only possibility for ANY positive impact on PRICE per mile is to find a multitude of material from where is can be made CHEAP.

Given that it costs so much gasoline/diesel to produce corn ethanol, it probably will take a totally new technology -- and raw material -- to make a PRICE per mile difference.

2-- Mileage is a "hugh" bugaboo with ethanol. Consumer Reports story on e85 shows that it is a loser at cost per mile in any scenario...plus the more they have to transport to make up for the much lower gas mileage will add to the cost of distribution due to far more fill ups needed.

In fact, we are now getting "only" 10% ethanol now in gas in the North East and my mileage has dropped by nearly 5% -- it is costing me more to drive now than when Gas was $.25 higher.

[Paladin2]

I think biodiesel has a $1/gal similar subsidy.

[SauronOfMordor]

Oh well, that's the price you have to pay if you want oil freedom.

Or you build lots of nuke plants, convert houses currently using oil heat to electric heat (heating oil is essentially diesel). Also convert coal to synthetic gasoline.

[TKDietz]

Your feedstock yields are off, or maybe they are just average yields for one state or one area. We've never had a nationwide average of 180 bushels of corn per acre. Certainly sometimes people get a lot more than that from an acre but that isn't the average yield for American farms. The national average for soybean yields is around 40 bushels per acre. Per acre soybean yields have not been increasing like the yields for corn in recent years. I've seen a lot soybean biodiesel yield numbers from different sources, but they range from 40 gallons per acre to 60 gallons per acre, instead of the 80 to 100 gallons per acre yield you are talking about. The per bushel yield is 1.4 gallons per bushel. I can't find anything showing the national average per acre biodiesel yield for soybeans, but on Wikipedia they say it's around 40 gallons per acre. http://en.wikipedia.org/wiki/Biodiesel Another site said average yields are 48 gallons per acre, and one even talked about good yields of 60 gallons per acre. Biodiesel is fine but that's a major problem with it. Per acre biodiesel yields are too low with the feedstocks we're using, especially when compared to the 650 gallon per acre yields from palm oil. Even though they've come up substantially in the last couple of decades and are much higher than biodiesel yields, per acre ethanol yields are too low as well. Maybe if cellulosic ethanol and biodiesel from oily algae pan out we'll start seeing yields in the thousands of gallons per acre, but not from corn or soybeans. I think we'll probably see super productive feedstock plants genetically engineered in the future and we may very well see different types of biofuel concoctions than the ethanol and biodiesel of today. Yields are going to go way up.

And by the way, "the residual of corn squeezings" is used as animal feed. One ethanol producer is now building a plant that will further process the spent corn to extract the oil for making biodiesel, still leaving behind a protein rich animal feed. For every 100 million gallons of ethanol produced from corn, they hope to get 7 or 8 million gallons of biodiesel from the spent grain. The fermentation and distillation process only removes the starches and sugars. What's left is a high protein animal feed that also has corn oil in it. According to an article I read recently, these "distillers grains" are "currently limited to 35% of cattle feed because of the fat content." They believe they can up that ratio if they remove the oil from the feed. http://www.freerepublic.com/focus/f-news/1736256/posts

[TKDietz]

I'm not arguing that farmers are not heavily subsidized, only that if they get more for their crops there will be less of a perceived need for subsidies. The majority of the subsidies paid out are crop subsidies based on the market price of the commodities. They'll set a target price for a bushel of corn. If the market price is lower than the price the government thinks farmers should be getting per bushel in order to stay in business, the subsidies kick in to make up the difference in the actual market price and this price the government thinks farmers ought to be getting. The lower the market price of a bushel of corn, the more subsidies are paid out. The higher the price, the lower the subsidies. Will farmers always lobby for more subsidies? You bet. But if food prices start going too high and farming starts to become really profitable people won't stand for a lot more subsidies to farmers.

[SierraWasp]

This whole "oxygenate" morass is genuinely BOGUS!!! From beginning to end!!! Especially here in CA where they're forced to truck it in to our refineries. The only thing worse was MTBE which was a terrible fraud on the people AND the environment which it was supposedly introduced to protect.

In fact, the whole beautique gasoline mess is infernally BOGUS and a corrupt waste of time, money and other resources!!! In fact, the whole "alternative fuels" universe is a black whole!!! Thank God prop 87 failed here in CA!!!

[JustaDumbBlonde]

".....and talk about plowing everything under to plant corn...the enviro's that wanted this ...are going to get every acre planted in corn..so goodbye treed lands..wetlands...marginal lands....deer..Pheasants ..ducks..etc...."

Not going to happen as far as I can tell. How did you arrive at this opinion? I don't know a single farmer who would give up woodlands and wetlands (and especially hunting) for the sake of planting corn. There are parks and refuges that will likely never be cleared for agriculture.

There are vast tracts of land near me that have been wooded, cleared and farmed and gone back to being planted in trees all in the last 40 years.

It would seem that you are going quite overboard here.

[SierraWasp]

Hay! C'mon up here an let's argue about this s'more, ok???

[tubebender]

If the price of corn gets high enough they will be tempted...

[JustaDumbBlonde]

"Will farmers always lobby for more subsidies? You bet."

Not true in the case of this farming family, and many others we know. We would much rather that the market price rise and subsidies cease.

[Paladin2]

Palm Oil definitely looks like the way to go, but I don't believe that there is much, if any, suitable climate in the US to grow it here The info I looked at for yields were from some study of optimal nitrogen use in MN. It still would seem to be a good idea to either take the oil fields away from Islamic nutjobs or don't buy any oil from them.

[TKDietz]

Biofuels might do that for you as more farmers get into growing biofuel feedstock crops instead of whatever it is they are currently growing. The big companies spending the big money on lobbying will still probably lobby for more subsidies though, and pitch it like it is all for the family farms. But if crop prices rise enough to support farmers without subsidies, the likelihood of additional subsidies being paid out diminishes.

[Mr. Lucky]

You heard wrong.

I got about 212 bushels per acre of corn this year. At 2.8 gallons of ethanol per bushel, that yields 593 gallons per acre.

[TKDietz]

I'm all for that. I don't really see it happening though just through use of ethanol and biodiesel. Biofuel use is increasing throughout the world, but not nearly fast enough to keep up with growing world oil demand. We only get something like 15% of our oil from the Middle East and other countries buy the rest of what they sell. Even if we replaced all of what we buy from them with biofuels, and we're a long way from doing that, there will still be plenty of buyers out there buying up Middle Eastern oil. Still, when you buy American made ethanol or biodiesel, you are supporting American farmers instead of the crazy Arabs and the Hugo Chavez's of the world. It keeps more of our money here and does reduce our dependence on foreign oil a little. It supplements our fuel supply. Even if all we are able to replace in the next few years is eight or ten percent of our automotive fuel supply, that would be no small amount. To get much higher than that we'll have to do something other than covert corn starches into ethanol or soy oil into biodiesel. At the same time we need to be drilling more for our own oil, getting better at extracting fuel from oil shale, using more liquefied coal, working on new biofuels, and so on. It wouldn't hurt for us to buy vehicles that get better fuel economy either. We could eventually get to the point that we import little or no oil.

[mountainlyons]

They have found more oil deposits than they thought ever existed. There is more oil in Colorado-Utah oil shale than Saudi Arabia ever had. Canada oil sands are huge. The Golf and Mexico oil discoveries are as big as the middle east. Too bad the Democrats will close all of this down and put us back into shortage like Carter did! I read an article about Einstein's last paper taking us to a new source of energy that will free us from muslem oil.

[TKDietz]

Isn't the national average yield closer to 150 bushels per acre though?

[Mr. Lucky]

The USDA expects the national average corn yield for 2006 to come in at about 153-154 bushels per acre, or enough to distill about 430 gallons of ethanol.

[TKDietz]

Corn yields keep improving. The national average yield was 20.5 bushels per acre in 1930 ( a bad year but averages had been below 30 bushels per acre ). Thirty years later in 1960 the average yield hit 54.7 bushels per acre. Then over the next twenty years the yield increased to 91 per acre by 1980. Tack on another twenty years and the average yields had hit 136.9 bushels per acre by the year 2000. They've climbed since then to more than 150 bushels per acre. Over time there have been some off years where corn yields have dropped a few bushels per acre or stayed relatively flat, but the overall trend has been for the yield to steadily increase.

Average corn yields will likely continue to increase to well over 200 bushels per acre, maybe even higher than 300 bushels per acre. Some people have gotten yields a good bit higher than that already.

An average yield of more than 357 bushels per acre would bring ethanol yields on up to over a 1000 gallons per acre with corn. But at some point we'll probably run out of ways to squeeze more bushels from each acre. We'll need some other plant, maybe something the mad scientists engineer, to get yields way on up to several thousand gallons per acre. I think it's probably doable with cellulosic ethanol technology or maybe some super sugar/starch producing plant scientists come up with. It may be that we end up producing some other biofuel different than either ethanol or biodiesel, but someday we'll get to the point where we can produce several thousand gallons per acre, satisfying automotive fuel needs for several families with each acre of land in production. Depending on how much oil we are able to produce domestically, with high biofuel yields like that we might get to where we could do with less than 100 million acres devoted to fuel crops and still produce enough to where we don't have to import much oil, if any.

[P-40]

Hay! C'mon up here an let's argue about this s'more, ok???

Sorry, I've been out of town the last week and a half....

[SierraWasp]

Well, I've been outta town for the past 3 days. Am workin my pings backwards, tryin ta catch up!!!

[SierraWasp]

Hey! My gas was down to $2.189 about a week ago and today it was back up to $2.379 and I'll just betcha it's because of this worthless wood alcohol they're wrongly sayin our gas needs for clean air in CA! Whata buncha tripe!!!

In fact, I was in business meetings over in Grampa Dave's neck of the woods for the past three days and the prices are way higher over there in Napa, CA!!! Yowser!!! Wowser!!! I, yi yie!!!

[Ernest_at_the_Beach]

Well this is bad too:

Blair hit by Saudi 'bribery' threat ~ Saudis Play Hardball With Blair

We need to get off the OIL TIT and no COST is TOO HIGH!

[SierraWasp]

"and no COST is TOO HIGH"

I understand what you're saying, but I don't fully agree with your zealous fervor completely. I don't want to be insulting, but your shouting that message like it's all our fault for enjoying that particular tit sounds awfully similar to the "PEACE AT ANY PRICE" crowd, to me.

Please forgive me, I probably took what you said incorrectly, but whenever someone shrieks something like that at me I tend to react by bowing my neck and hollering something equally as upsetting right back. At least this time I toned it down a bit and I'm sure you're glad of that, right?

We didn't create this sudden highly increased demand for oil and it's not entirely our fault it's happening. We just happen to be the biggest and easiest target for being spat upon and I resent that along with indulgent self-hating guilt trips that are totally unjustified in the first place.

Sorry... That's just the way I feel about it my fine FRiend.

[Ernest_at_the_Beach]

I apologize for the hollering but I was all torqued up from these threads I posted yesterday....:

Blair hit by Saudi 'bribery' threat ~ Saudis Play Hardball With Blair

And

Blair: Moderate policies defeat terror

And

Syria calls for U.S. timetable in Iraq

[Bloody Sam Roberts]

Grow your own. We plant, and eat (with a little help from our friends) a half acre a year.

How long before that becomes illegal? You can use corn to make your own ethanol you know. That simply will...not...do.