Re: RES: stock to buy- GPRE

[Randy <rdsmith5@xxxxxxxx>]

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
>
>
>