[Date Prev][Date Next][Thread Prev][Thread Next][Date Index][Thread Index]

Re: RES: stock to buy- GPRE



PureBytes Links

Trading Reference Links

Gabriel

what Alex said ethanol production is basically correct and it is really not that sugar cane as a feedstock for ethanol is greatly more productive or efficient than corn . In the US sugar prices do not float with the world sugar price and are held artificially high vs world sugar price. This makes sugar cane or beets in Brazil cheaper as a feedstock and therefore more cost effective.

One last problem with ethanol is our distribution system .... mainly pipelines . Ethanol is very corrosive and many people question increased maintenance and replacement costs for equipment in the system. So its a trade , long term if the subsidies are removed you gotta wonder about its feasibility.

regards
randy smith

Gabriel Pellegrini wrote:
Alex,

What you say about ethanol is not true for Brazilian ethanol made from sugar
cane. The Brazilian ethanol production is 8x more energy efficient than corn
ethanol.

Regards,
Gabriel

-----Mensagem original-----
De: unicorn@xxxxxxxxx [mailto:unicorn@xxxxxxxxx] Em nome de Alex Matulich
Enviada em: quarta-feira, 2 de julho de 2008 17:48
Para: omega-list@xxxxxxxxxx
Assunto: Re: stock to buy- GPRE

Jim:

Well the concept of energy loss in any conversion technique is not
new. Energy is lost in an electric motor. Corn absorbs energy from
the sun and fertilizer, I guess. Seems to be pretty efficient.

No, it's pretty inefficient, and the sun has nothing to do with
it.

The point is, ethanol is currently a negative sum game.  If all the
farm equipment and processing equipment used to produce ethanol ran
on ethanol, then the ethanol produced wouldn't be enough to run
the equipment to produce it.  The fact that the equipment runs on
oil now doesn't matter - bottom line, the energy cost of producing
ethanol is higher than the energy available in the ethanol.

Add in the energy contribution from sunlight (which is free), and
the efficiency becomes even worse.  All that energy going in, and
hardly any coming out.

Therefore, ethanol is NOT a viable fuel, and doesn't look like it
will be for the forseeable future.  The reason oil works is because
it takes less energy to drill oil and refine it than the energy you
obtain from the products.  If we ran out of oil today, producing
ethanol would exacerbate the problem.

In that sense, investing in an ethanol company stock is a gamble
that someday ethanol will be cost-effective.  It might be, someday,
who knows?

Short term, GPRE may be a good buy due to the current fundamentals,
although I think you're ignoring return on capital.  Looking at the
fundamentals long term, the market demand for ethanol is just not
there and not real; it's artificialy induced by politics, not real
market forces.

What matters as far as the stock is concerned is dollars in vs.
dollars out. They are getting much in the way of dollars out. My
money is in.

As I said, for a short-term play, that makes sense.

-Alex