We had the internet bubble and the real estate bubble and now, there is the ethanol bubble. Recently, I ran some numbers on ethanol and to my amazement realized that it is – too use a catch phrase from the environmental world -- not sustainable. Turning food into fuel is just plain silly; and when oil prices come down the ethanol bubble could pop big.
I ran did a little research and found some numbers:
- 47% of the Mexician' diet is corn
- it takes 2.4 pounds of corn a day to feed a hungry person
- it takes 22 pounds of corn to make one gallon of ethanol
- there are 42 gallons of refined gas in one barrel of oil
If you fill up with ethanol, every time you pull that SUV into the gas station and pump 22 gallons, you starve a poor person for six months. Another way to look at a barrel of oil is that it has enough energy to feed a person for the entire year. Using that logic, the much debated Arctic National Wildlife Refuge -- with at least 3.2 billion barrels of oil -- contains enough food to feed the entire world for six months. If you think my estimates are wrong, you're right; the real math is actually worse.
So what does that mean for investors? When the public and politicians own up to the fact that food for fuel causes world food prices to rise and starve the poor, all those companies currently flying high on ethanol could come crashing to earth. A few of the companies that have been running on the recent ethanol excitement include Monsanto (NYSE: MON), Potash (NYSE: POT), Mosaic (NYSE: MOS), John Deere (NYSE: DE), Archer-Daniels-Midland (NYSE: ADM) and Bunge (NYSE: BG).
Kevin Kersten is an Stock and Options Analyst with InvestorsObserver.com. Disclosure note: Mr. Kersten owns and/or controls a diversified portfolio of long and short positions that may include holdings in companies he writes about.











Reader Comments (Page 1 of 1)
7-07-2008 @ 2:28PM
Ben Jantzen said...
There is not food shortage. It's called overpopulation. Religion teaches you to pop out as many babies as you can and that's what has happened. Just like any other animal if you reproduce more than what your food source can sustain then you're going to have starvation. Its basic biology. It doesn't take a rocket scientist to figure that out. So what's the big surprise? To bring nature back into balance, just as in the animal kingdom, half of the population has to die off from starvation, then the next generation will have plenty of food to live on. Sounds little harsh, but that's nature.
The same thing will happen here in America if we keep building houses on farmland. When all the farmland is gone, where do you think we're going to get our food? Wake up America before it's too late.
7-07-2008 @ 3:15PM
speculator said...
Read "Club of Rome-Limits of Growth". Matt Simmon-who has been right about oil-believes they were to positive.
www.theinvestingspeculator.com
7-07-2008 @ 3:30PM
william lindblad said...
Religion and ignorance have a big part in overpopulation and neither factor is about to change anytime soon. Medical science has also taken out most of the disease factor. Hence, the worlds population has doubled and will continue until we get to a soylent green scenario. However, that's way in the future. In the meantime, a little more research on turning ag based product into fuel will reveal that it takes at least 2 gals of water to make 1 gal of fuel.
While there is NO oil shortage we are well on our way to facing a WATER shortage.
Every idea is not necessarily a good one.
7-07-2008 @ 10:44PM
sarah gilbert said...
I don't even think it's about overpopulation, it's more about overUSE. we don't *need* to travel an average of 28 (or whatever it is) miles per day to get to work, we don't *need* to ship asparagus across the planet so we can enjoy it in the winter, we don't *need* to have our crab harvested in Washington, shelled in China, then shipped to the East Coast to eat. we don't need to produce so much corn and soy to feed our planet on cheap, nutritionless calories.
what we need to do is turn down the volume and use less of everything. using up our food -- and our land -- to create fuel is crazy, it was never smart and how is it that we got so caught up in the idea? "don't worry we can always make more"? what were we thinking? if we just used land more intelligently, if people were more connected to their food, the population crisis would work itself out.
heck, the more time i spend in the garden and the kitchen, the less time i have to make babies ... ;)
7-07-2008 @ 10:45PM
Alouisis said...
Exactly right - ethanol from corn - or anything is a stupid waste of time and money. It accomplishes none of the goals of an altrernative fuel. It is dirty, it releases CO2 into the air and it consumes a scarce agricultural resource. There is only one perfect answer and it is completely compatible with our economy. Gasoline cars, gas fired furnaces, all can convert to run on Hydrogen.
The answer is Hydrogen cracked from water (the stuff that covers three fourths of our planet). It burns and the only emission is water, pure water.
Why not now? The hydrogen producing companies are all owned or controlled by oil companies. The oil companies are producing hydrogen from - OIL. This provides no relief and makes hydrogen advocacy seem as stupid as ethanol from corn.
Hydrogen from water - plentiful, cheap. clean.
7-07-2008 @ 10:45PM
peat said...
It is important to note that only the carbohydrates from the corn are used in the production of ethanol, and the protien is still availble as a food source. Without factoring this in, the statements about food loss to the poor are simply not accurate.
7-08-2008 @ 1:30PM
Grey said...
I have been researching the food vs. fuel debate for months now and this is one of the most misinformed and misleading articles I've read. First off, the corn used for ethanol production is not used for human consumption. Sweet corn is what humans eat. Secondly, Peat is absolutely right. Ethanol production is just uses the carbohydrates. The bi-product (the protein) is used for animal feed. This whole debate is propaganda. Once you start looking into the issue you realize that it is really a non-iussue for everyone, except pig farmers for now because pigs can't eat the ethanol bi-product, yet. They are developing products now that the swine will be able to eat.
7-09-2008 @ 3:59PM
Terry de Winne said...
The simple fact is, they don't use bioethanol for transport in Mexico - only for drinking. Kersten is lacken!
7-09-2008 @ 3:59PM
Terry de Winne said...
Oh, and by the way - hydrogen is only an energy carrier and takes more energy to produce than the worst case ethanol scenario. OK, if you have an energy surplus from wind power or similar renewable source, otherwise - doh!
7-09-2008 @ 4:00PM
Terry de Winne said...
Which followed on from my comment that they don't make ethanol to use in Mexican transport, only to drink, so the argument sort of falls on its face.
7-09-2008 @ 4:12PM
kevin.kersten said...
Corn tortita's make up a large part of the mexicians diet... largely among the poor.
7-09-2008 @ 4:16PM
kevin.kersten said...
Grey....
In fact corn used in ethnol production is the exact same corn fed to humans. (Granted the fresh vegatable kind is in fact a different breed); but Cornflakes, corn flour -cornbread-, and corn syrup (common sweetner in soda) all comes from processsing the same common field corn. Fortunately, we are rich enough in this country we don't have to eat corn meal several times a day.
7-11-2008 @ 4:48PM
yero said...
Grey, if you have been investigating the topic per months you have not done it of correct form. The sweet corn is not the only one of human consumption, also there is consumed the starchy one that is more extensively produced and is the one that turns in ethanol. Remember that US is not the whole world and if you eat sweet corn is an exception, not the generality. Calculate well, the energy balance for producing ethanol from corn is unfavorable.
7-18-2008 @ 10:49AM
Jack said...
Kevin your going to have a short career as a writer. Try doing some research before you write another article. There are only 42 gallons in a barrel of oil and it will only make 19.5 gallons of gasoline. The mash left over from making Ethanol is one of the best animal feeds there is. There are millions of acres of idle land in this country for raising more crops, but it won't happen overnight, farmers have to plan for what they will grow and prepare for the demand. We'll never get away from oil if renewable fuels don't start somewhere and corn was the first and best choice, but only the beginning. Do some research and see what is going on in Bio-Fuels.
9-25-2008 @ 8:47AM
Brian J. Donovan said...
Louisiana Enacts the Most Comprehensive Advanced Biofuel Legislation in the Nation
__________________
Advanced Biofuel Industry Development Initiative Benefits Consumers, Farmers and Gas Station Owners with Localized “Field-to-Pump” Strategy
Baton Rouge, LA (September 25, 2008) – Governor Bobby Jindal has signed into law the Advanced Biofuel Industry Development Initiative, the most comprehensive and far-reaching state legislation in the nation enacted to develop a statewide advanced biofuel industry. Louisiana is the first state to enact alternative transportation fuel legislation that includes a variable blending pump pilot program and a hydrous ethanol pilot program.
Field-to-Pump Strategy
The legislature found that the proper development of an advanced biofuel industry in Louisiana requires implementation of the following comprehensive “field-to-pump” strategy developed by Renergie, Inc.:
(1) Feedstock Other Than Corn
(a) derived solely from Louisiana harvested crops;
(b) capable of an annual yield of at least 600 gallons of ethanol per acre;
(c) requiring no more than one-half of the water required to grow corn;
(d) tolerant to high temperature and waterlogging;
(e) resistant to drought and saline-alkaline soils;
(f) capable of being grown in marginal soils, ranging from heavy clay to light sand;
(g) requiring no more than one-third of the nitrogen required to grow corn, thereby reducing the risk of contamination of the waters of the state; and
(h) requiring no more than one-half of the energy necessary to convert corn into ethanol.
(2) Decentralized Network of Small Advanced Biofuel Manufacturing Facilities
Smaller is better. The distributed nature of a small advanced biofuel manufacturing facility network reduces feedstock supply risk, does not burden local water supplies and provides for broader based economic development. Each advanced biofuel manufacturing facility operating in Louisiana will produce no less than 5 million gallons of advanced biofuel per year and no more than 15 million gallons of advanced biofuel per year.
(3) Market Expansion
Advanced biofuel supply and demand shall be expanded beyond the 10% blend market by blending fuel-grade anhydrous ethanol with gasoline at the gas station pump. Variable blending pumps, directly installed and operated at local gas stations by a qualified small advanced biofuel manufacturing facility, shall offer the consumer a less expensive substitute for unleaded gasoline in the form of E10, E20, E30 and E85.
Pilot Programs
(1) Advanced Biofuel Variable Blending Pumps - The blending of fuels with advanced biofuel percentages between 10 percent and 85 percent will be permitted on a trial basis until January 1, 2012. During this period the Louisiana Department of Agriculture and Forestry Division of Weights & Measures will monitor the equipment used to dispense the ethanol blends to ascertain that the equipment is suitable and capable of producing an accurate measurement.
(2) Hydrous Ethanol - The use of hydrous ethanol blends of E10, E20, E30 and E85 in motor vehicles specifically selected for test purposes will be permitted on a trial basis until January 1, 2012. During this period the Louisiana Department of Agriculture and Forestry Division of Weights & Measures will monitor the performance of the motor vehicles. The hydrous blends will be tested for blend optimization with respect to fuel consumption and engine emissions. Preliminary tests conducted in Europe have proven that the use of hydrous ethanol, which eliminates the need for the hydrous-to-anhydrous dehydration processing step, results in an energy savings of between ten percent and forty-five percent during processing, a four percent product volume increase, higher mileage per gallon, a cleaner engine interior, and a reduction in greenhouse gas emissions.
Act No. 382, entitled “The Advanced Biofuel Industry Development Initiative,” was co-authored by 27 members of the Legislature. The original bill was drafted by Renergie, Inc. Representative Jonathan W. Perry (R - District 47), with the support of Senator Nick Gautreaux (D - District 26), was the primary author of the bill. Reflecting on the signing of Act No. 382 into law, Brian J. Donovan, CEO of Renergie, Inc. said, “I am pleased that the legislature and governor of the great State of Louisiana have chosen to lead the nation in moving ethanol beyond being just a blending component in gasoline to a fuel that is more economical, cleaner, renewable, and more efficient than unleaded gasoline. The two pilot programs, providing for an advanced biofuel variable blending pump trial and a hydrous ethanol trial, established by the State of Louisiana should be adopted by each and every state in our country.”
State Agencies Must Purchase or Lease Vehicles That Use Alternative Fuels
Louisiana’s Advanced Biofuel Industry Development Initiative further states, “The commissioner of administration shall not purchase or lease any motor vehicle for use by any state agency unless that vehicle is capable of and equipped for using an alternative fuel that results in lower emissions of oxides of nitrogen, volatile organic compounds, carbon monoxide, or particulates or any combination thereof that meet or exceed federal Clean Air Act standards.”
Advanced Biofuel Price Preference for State Agencies
Louisiana’s Advanced Biofuel Industry Development Initiative provides that a governmental body, state educational institution, or instrumentality of the state that performs essential governmental functions on a statewide or local basis is entitled to purchase E20, E30 or E85 advanced biofuel at a price equal to fifteen percent (15%) less per gallon than the price of unleaded gasoline for use in any motor vehicle.
Economic Benefits
The development of an advanced biofuel industry will help rebuild the local and regional economies devastated as a result of hurricanes Katrina and Rita by providing:
(1) increased value to the feedstock crops which will benefit local farmers and provide more revenue to the local community;
(2) increased investments in plants and equipment which will stimulate the local economy by providing construction jobs initially and the chance for full-time employment after the plant is completed;
(3) secondary employment as associated industries develop due to plant co-products becoming available at a competitive price; and
(4) increased local and state revenues collected from plant operations will stimulate local and state tax revenues and provide funds for improvements to the community and to the region.
“Representative Perry and Senator Gautreaux have worked tirelessly to craft comprehensive advanced biofuel legislation which will maximize rural development, benefit consumers, farmers and gas station owners while also protecting the environment and reducing the burden on local water supplies,” said Donovan. “Representative Perry, Senator Gautreaux, and Dr. Strain, Commissioner of the Louisiana Department of Agriculture and Forestry, should be praised for their leadership on this issue.”
About Renergie
Renergie was formed on March 22, 2006 for the purpose of raising capital to develop, construct, own and operate a network of ten ethanol plants in the parishes of the State of Louisiana which were devastated by hurricanes Katrina and Rita. Each ethanol plant will have a production capacity of five million gallons per year (5 MGY) of fuel-grade ethanol. Renergie’s “field-to-pump” strategy is to produce non-corn ethanol locally and directly market non-corn ethanol locally. On February 26, 2008, Renergie was one of 8 recipients, selected from 139 grant applicants, to share $12.5 million from the Florida Department of Environmental Protection’s Renewable Energy Technologies Grants Program. Renergie received $1,500,483 (partial funding) in grant money to design and build Florida’s first ethanol plant capable of producing fuel-grade ethanol solely from sweet sorghum juice. On April 2, 2008, Enterprise Florida, Inc., the state’s economic development organization, selected Renergie as one of Florida’s most innovative technology companies in the alternative energy sector. By blending fuel-grade ethanol with gasoline at the gas station pump, Renergie will offer the consumer a fuel that is more economical, cleaner, renewable, and more efficient than unleaded gasoline. Moreover, the Renergie project will mark the first time that Louisiana farmers will share in the profits realized from the sale of value-added products made from their crops.
9-25-2008 @ 9:02AM
Brian J. Donovan said...
Louisiana Enacts the Most Comprehensive Advanced Biofuel Legislation in the Nation
__________________
Advanced Biofuel Industry Development Initiative Benefits Consumers, Farmers and Gas Station Owners with Localized “Field-to-Pump” Strategy
Baton Rouge, LA (September 25, 2008) – Governor Bobby Jindal has signed into law the Advanced Biofuel Industry Development Initiative, the most comprehensive and far-reaching state legislation in the nation enacted to develop a statewide advanced biofuel industry. Louisiana is the first state to enact alternative transportation fuel legislation that includes a variable blending pump pilot program and a hydrous ethanol pilot program.
Field-to-Pump Strategy
The legislature found that the proper development of an advanced biofuel industry in Louisiana requires implementation of the following comprehensive “field-to-pump” strategy developed by Renergie, Inc.:
(1) Feedstock Other Than Corn
(a) derived solely from Louisiana harvested crops;
(b) capable of an annual yield of at least 600 gallons of ethanol per acre;
(c) requiring no more than one-half of the water required to grow corn;
(d) tolerant to high temperature and waterlogging;
(e) resistant to drought and saline-alkaline soils;
(f) capable of being grown in marginal soils, ranging from heavy clay to light sand;
(g) requiring no more than one-third of the nitrogen required to grow corn, thereby reducing the risk of contamination of the waters of the state; and
(h) requiring no more than one-half of the energy necessary to convert corn into ethanol.
(2) Decentralized Network of Small Advanced Biofuel Manufacturing Facilities
Smaller is better. The distributed nature of a small advanced biofuel manufacturing facility network reduces feedstock supply risk, does not burden local water supplies and provides for broader based economic development. Each advanced biofuel manufacturing facility operating in Louisiana will produce no less than 5 million gallons of advanced biofuel per year and no more than 15 million gallons of advanced biofuel per year.
(3) Market Expansion
Advanced biofuel supply and demand shall be expanded beyond the 10% blend market by blending fuel-grade anhydrous ethanol with gasoline at the gas station pump. Variable blending pumps, directly installed and operated at local gas stations by a qualified small advanced biofuel manufacturing facility, shall offer the consumer a less expensive substitute for unleaded gasoline in the form of E10, E20, E30 and E85.
Pilot Programs
(1) Advanced Biofuel Variable Blending Pumps - The blending of fuels with advanced biofuel percentages between 10 percent and 85 percent will be permitted on a trial basis until January 1, 2012. During this period the Louisiana Department of Agriculture and Forestry Division of Weights & Measures will monitor the equipment used to dispense the ethanol blends to ascertain that the equipment is suitable and capable of producing an accurate measurement.
(2) Hydrous Ethanol - The use of hydrous ethanol blends of E10, E20, E30 and E85 in motor vehicles specifically selected for test purposes will be permitted on a trial basis until January 1, 2012. During this period the Louisiana Department of Agriculture and Forestry Division of Weights & Measures will monitor the performance of the motor vehicles. The hydrous blends will be tested for blend optimization with respect to fuel consumption and engine emissions. Preliminary tests conducted in Europe have proven that the use of hydrous ethanol, which eliminates the need for the hydrous-to-anhydrous dehydration processing step, results in an energy savings of between ten percent and forty-five percent during processing, a four percent product volume increase, higher mileage per gallon, a cleaner engine interior, and a reduction in greenhouse gas emissions.
Act No. 382, entitled “The Advanced Biofuel Industry Development Initiative,” was co-authored by 27 members of the Legislature. The original bill was drafted by Renergie, Inc. Representative Jonathan W. Perry (R - District 47), with the support of Senator Nick Gautreaux (D - District 26), was the primary author of the bill. Reflecting on the signing of Act No. 382 into law, Brian J. Donovan, CEO of Renergie, Inc. said, “I am pleased that the legislature and governor of the great State of Louisiana have chosen to lead the nation in moving ethanol beyond being just a blending component in gasoline to a fuel that is more economical, cleaner, renewable, and more efficient than unleaded gasoline. The two pilot programs, providing for an advanced biofuel variable blending pump trial and a hydrous ethanol trial, established by the State of Louisiana should be adopted by each and every state in our country.”
State Agencies Must Purchase or Lease Vehicles That Use Alternative Fuels
Louisiana’s Advanced Biofuel Industry Development Initiative further states, “The commissioner of administration shall not purchase or lease any motor vehicle for use by any state agency unless that vehicle is capable of and equipped for using an alternative fuel that results in lower emissions of oxides of nitrogen, volatile organic compounds, carbon monoxide, or particulates or any combination thereof that meet or exceed federal Clean Air Act standards.”
Advanced Biofuel Price Preference for State Agencies
Louisiana’s Advanced Biofuel Industry Development Initiative provides that a governmental body, state educational institution, or instrumentality of the state that performs essential governmental functions on a statewide or local basis is entitled to purchase E20, E30 or E85 advanced biofuel at a price equal to fifteen percent (15%) less per gallon than the price of unleaded gasoline for use in any motor vehicle.
Economic Benefits
The development of an advanced biofuel industry will help rebuild the local and regional economies devastated as a result of hurricanes Katrina and Rita by providing:
(1) increased value to the feedstock crops which will benefit local farmers and provide more revenue to the local community;
(2) increased investments in plants and equipment which will stimulate the local economy by providing construction jobs initially and the chance for full-time employment after the plant is completed;
(3) secondary employment as associated industries develop due to plant co-products becoming available at a competitive price; and
(4) increased local and state revenues collected from plant operations will stimulate local and state tax revenues and provide funds for improvements to the community and to the region.
“Representative Perry and Senator Gautreaux have worked tirelessly to craft comprehensive advanced biofuel legislation which will maximize rural development, benefit consumers, farmers and gas station owners while also protecting the environment and reducing the burden on local water supplies,” said Donovan. “Representative Perry, Senator Gautreaux, and Dr. Strain, Commissioner of the Louisiana Department of Agriculture and Forestry, should be praised for their leadership on this issue.”
About Renergie
Renergie was formed on March 22, 2006 for the purpose of raising capital to develop, construct, own and operate a network of ten ethanol plants in the parishes of the State of Louisiana which were devastated by hurricanes Katrina and Rita. Each ethanol plant will have a production capacity of five million gallons per year (5 MGY) of fuel-grade ethanol. Renergie’s “field-to-pump” strategy is to produce non-corn ethanol locally and directly market non-corn ethanol locally. On February 26, 2008, Renergie was one of 8 recipients, selected from 139 grant applicants, to share $12.5 million from the Florida Department of Environmental Protection’s Renewable Energy Technologies Grants Program. Renergie received $1,500,483 (partial funding) in grant money to design and build Florida’s first ethanol plant capable of producing fuel-grade ethanol solely from sweet sorghum juice. On April 2, 2008, Enterprise Florida, Inc., the state’s economic development organization, selected Renergie as one of Florida’s most innovative technology companies in the alternative energy sector. By blending fuel-grade ethanol with gasoline at the gas station pump, Renergie will offer the consumer a fuel that is more economical, cleaner, renewable, and more efficient than unleaded gasoline. Moreover, the Renergie project will mark the first time that Louisiana farmers will share in the profits realized from the sale of value-added products made from their crops.