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Strategies & Market Trends : Mish's Global Economic Trend Analysis -- Ignore unavailable to you. Want to Upgrade?

To: Crimson Ghost who wrote (46214)	2/10/2006 10:48:34 AM
From: mishedlo	Read Replies (1) \| Respond to of 116555

Ethanol's poised to fuel a drive for corn SAN FRANCISCO (MarketWatch) -- Corn's looking particularly tasty these days -- at least for investors looking to cash in on the ethanol craze. The renewable fuel comes from fermented sugar -- which can be derived from all kinds of biomass, including corn. As the world's largest producer and exporter of the crop, it makes most sense for the United States to use corn to produce ethanol. "Corn futures have the potential to explode higher due to increased demand from ethanol production," said Chris Kraft, an analyst at CKFutures.com. Demand for the alternative fuel has already helped sugar prices double in the past six months to trade over 19 cents per pound on the New York Board of Trade -- their highest levels since 1981. Corn has a long way to catch up. March corn trades around $2.25 a bushel on the Chicago Board of Trade, a five-month high. But if you consider the federal tax credit on ethanol production in the U.S. and combine it with corn's lofty supply levels -- it becomes a much more attractive market. In January, the U.S. Department of Agriculture estimated corn's 2005-2006 ending stocks -- the storable amount of the commodity at the end of the crop year -- at 2.4 billion bushels. That's the largest since the 1987-1988 crop year, according to Michael McDougall, an analyst at Fimat USA. "Corn is in an advantageous situation," he said, especially given that sugar production has been running at a deficit against consumption for the last three years. Producer profit Even before President Bush endorsed the use of ethanol in his State of the Union speech as a major means to reduce the country's dependence on oil, companies producing the alternative fuel from corn were reaping its benefits. "No one talks about ... the windfall that ethanol suppliers are collecting," said Tom Kloza, chief oil analyst at the Oil Price Information Service (OPIS), who estimates that profits can run to $50 to $60 a barrel. Suppliers can get as much as $2.70 per gallon for ethanol that costs them $1.15 a gallon to make, and 10-15 cents a gallon to transport, he said. With 42 gallons in a barrel, a tax credit of 51 cents per gallon of ethanol would equate to about $21 a barrel. "Anyone manufacturing ethanol this spring and summer will be making the normal $21 a barrel or so they can count on because of the tax subsidy, but they are also making nearly $40 a barrel more because of the high price of gasoline and the perceived shortage of ethanol," he said. "An ethanol plant could conceivably be making many multiples of what a refinery is making -- for the moment," he said. That'll motivate more construction of ethanol plants and maybe even contribute to a slight surplus in ethanol for next year, he said, though the supply outlook for this year's spring/summer period "looks a bit scary." Output growth Ethanol's popularity promises to grow significantly going forward. Bush's reference to new technology and a reduction in oil imports suggests the "use of ethanol in the U.S. energy future will grow well beyond the 7.5 billion annual gallons called for in the Energy Bill passed last year to something that could reach between 30 and 60 billion gallons over the next 20 years," said Neil Koehler, chief executive offer of Pacific Ethanol (PEIX) a refiner of the fuel based in California. That "would make a large contribution to the 140 billion-gallon annual gasoline market in the U.S.," he said. Koehler's company said it's constructing a "large scale" ethanol production facility in Madera County, California, and developing four other plants on the West Coast. Pacific Ethanol is a 100% ethanol play, said veteran commodities trader and MarketWatch commentator Kevin Kerr. It'll have low or no transport costs because of its location in California -- it only has to transport the unrefined grain, which is far cheaper than moving ethanol, he said. MORE...... marketwatch.com

To: Crimson Ghost who wrote (46214)	2/10/2006 10:58:40 AM
From: mishedlo	Read Replies (2) \| Respond to of 116555

Canada Jobless Rate Up Unexpectedly Canadian employers hired 16,100 full-time workers last month and 10,200 part-timers. The public sector added 42,800 employees, but the private sector laid off 12,900. The biggest job gain was in public administration, which saw an increase of 15,000, bolstered by temporary workers hired for the Jan. 23 federal election. Employers in the natural resources sector hired 12,300 workers with the strongest gains in Alberta and British Columbia. Employment in this sector has jumped 19.2% since the end of 2002, fueled by Alberta's strong oil and gas sector. .... .... [Energy, govt handouts, or bust - Mish] Message 22152449

To: Crimson Ghost who wrote (46214)	2/10/2006 12:01:19 PM
From: Broken_Clock	Respond to of 116555

That didn't take a rocket scientist to figure out. I saw his nose growing right on TV!