Commodity bubble ???

Ratio411 - you do realize even with current ethanol production US agriculture still produces an annual surplus of corn? That the annual amount of fossil fuel utilized by the US farmer would remain virtually the same with or without ethanol production? US agriculture would just produce a larger surplus which instead of being utilized domestically would be exported overseas? That the 1.6 to 1 ratio you mentioned is for all energy inputs (petroleum, electricity, natural gas, etc.) not just fossil fuel? That the 1.6 to 1 ratio does not include an energy credit for ethanol production by-product which is utiilzed as an animal feed stock and other things?

 

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It's possible to utilize bio fuels to produce bio fuels and transport them, etc with the same. It has been done in South America using sugar cane. I get a huge laugh when people say hiw much fossile fuel would be used to produce a gallon of bio fuel. When it only makes sense to use the fuel being produced to drive the method. We are being sold a bill of goods, because if demand for corn would increase, more would be produced. No one wants to grow what cannot be sold and areas sit fallow when demand is not there. The addition of fossil fuel solely to contaminate the ethonal is a law that needs to be repealed. IMHO

 

Ethanol is a great product . Using corn or food growing areas to produce it is not viable.
Green waste , switch grass and a host of other products will give a bit better return per bushel and is very cheap to retrieve.
Ethanol is high octane 110+ but lower BTUs by an equal amount. It is an engine life extender because of the very clean burn . In CA where MBTF was used as an additive it works well and does not poison ground water and wells.
I believe Precious Metals would retreat if we had a real strong energy policy. We send a vast amount of cash out of America for oil.

 

Pepperoni has it right. Ethanol is not really cost effective when using corn as the feed stock. Sugar cane has a different cost equation and is economically viable. Ethanol in the form of E-85 is a very good fuel and a nice compliment to other fuels. It's cleaner, but more corrosive. That's why flex fuel engines have stainless plumbing. Where the interest is, is with waste wood and switch grass and corn storge (i.e. stalks and such). The issue is getting it to ferment sufficiently to make alcohol before distillation. They're working on the yeast/sugar additive mixture and makeup to get the mash right. Compressed nat gas is the cleanest fuel by far. After 100K, your engine still looks brand new. Minimal emissions. Safter. However, zilch for a distribution network because it's not gasoline. Propane is also a good fuel when you can use bottles. Batteries are great but have little range and you need to be close to an outlet. That's why so many of these exotic fuels are great in a hub & spoke operation. Nat gas is the nut. Outfit your local delivery fleet for $2K a vehicle. Intall a $5K compressor and tap off your regular natural gas service. Fuel costs would be under a dollar a gallon equivalent. At MDOT back in the 90's, we were running 6 different fuels at one time. Gas, diesel, propane, E-85, CNB and electric. And they've got solar receptors on quite a bit of stuff (lights, flashing arrows, traffic counters, etc.). And this will be the future - various fuels for various uses. They've all got their strengths and weaknesses.

peace,

rono

 

Bio Diesel is currently being produced from algae. Chinese factories now put out solar collectors for a fraction of our costs. Japanese researchers have built tidal and wave dynamos with advanced technology. PMs should do well when the world currency standard becomes the Yaun instead of the dollar. Besides being held hostage by the energy companies, our future is being left in the dust. IMHO

gary

 

2009 average yeild of corn per acre was 160 bushels. The ethanol conversion rate for corn is 2.7 gallons per bushel or 445 gallons of ethanol per acre. To be honest I find the 1.6 to 1 energy deficit figure mentioned above highly doubtful.

To be honest I am not sold on corn based ethanol as a longterm solution. But short-term - it is a solution which produces an ROI on building domestic ethanol production capacity utilizing surplus US agriculture production. As I stated above even with current ethanol production the US still produces a large annual surplus of corn.

 

Bio diesel from algae is a good renewable. If the pond get big enough you just re harvest the same algae over again. The diesel part is good but if you can mix and match a jet fuel from the pond it would be a real positive as these two products use a large portion of fuel needs.
A strong multifaceted energy program will let us collect fine coin rather than hedge with bullion .
These programs were first tried in the early 1980s . Oil became so cheap that grants from large companies went away but a host of people from oil companies, propane companies ,and agricultural colleges did a lot of work for about five years on this .

 

The 1.6 to 1 figure is highly dubious. It was put together by an environmental think tank. Any numbers like this are meaningless unless someone drills down to the assumptions, and another group did that another study showed 1.3 to 1.6 MORE energy from ethanol than inputs.

Long term I do not like using food for energy, I think something like using untillable land for biomass would be more in our interest than using rapidly disappearing tillable cropland. I am CFO of a large agricultural firm, and we were briefed last fall on the major factors moving crop prices. Wheat harvests were down around the world, and that is what increased demand for corn from the US. Ethanol production hurt, but the major change was foreign demand to replace wheat crops lost. For soybeans, we have the largest stockpile in history, prices for beans seem to be more speculative that Chinese demand will continue to grow despite historically high stockpiles. This means if the Chinese put in place an import freeze soybean prices will drop like a rock.

 

Still no matter how you crunch the numbers - the agricultural energy inputs are basically static in the equation. Either the corn is going to stay in our country and processed into ethanol or is going to be exported out as a raw grain commodity. Corn acerage has not increased significantly with the E-10 mandate. And any increase has resulted in lower planted acerage of other high energy input agricultural crops.

 

CornTalk?

 

Good one.

I think it demonstrates all commodities are their own markets, and just because you believe all commodities should go up, (or down), doesn't mean any particular one will. Same with PM's. If you are sure they will go up, maybe you should invest in all of them just in case one of the metals have a peculiar market condition that could cause it to go down.

How is that for an economists (un)answer?

 

No matter how you slice it, we are at the whim of the world economy. If we use the corn for fuel, food costs may rise. If demand rises overseas for corn, food prices will rise. If the sun shines too much, food prices will rise. If it rains too much, food prices will rise. Agriculture or OPEC, take your pick. IMHO

 

Thanks for bringing us back in to a PM discussion. Taking it up to a 10,000 foot view, there are certainly supply/demand dynamics that are driving commodity prices and this year is no exception. However when you look at the broad based commodity move in 2010 something else is at work. Cotton, Sugar, Wheat, Corn, Copper, Coffee Gold and Silver all had an incredible run. This is not ALL explained by crop failures, increased demand, decreased supply etc. We are seeing inflation and the expectation of inflation work it's way into input prices. As everyone knows, the dollar is the reserve currency and this allows the US to export some if it's inflation to other countries that hold large quantities of dollars in reserve (so they can conduct business in dollar denominated trade). Many countries around the globe are beginning to experience a significant amount of consumer price inflation as their input and import costs go up. In reaction you see them increase their lending rate to strengthen their currency. This is happening in S. America and in Asia. If you have read many of my posts you have probably picked up on the fact that I believe we will see significant inflationary pressure here as well (more than we have already; it's already begun). Commodities in general have traditionally been a good store of value (purchasing power) in an inflationary invironment. If you are set up to produce and deal with a kabillion bushels of wheat or other base commodity I think you are in good shape for many years to come. For the rest of us I think Gold and Silver will prove to be an equally effective way to preserve wealth. I am not a collector or a supply/demand driven investor in PM's; I got in a couple of years ago because I came to believe Fed Policy, current and projected debt levels, future unfunded social programs, geopolitical risk and lack of political will deal with it all militate against our current standard of living. Metals will rise in response.

Regards,

Bluesboy65

 

I had E-10 in my car two weeks ago, when I went to the local coin shop. Best I can do.

 

Everyone see what happened to crude yesterday ? Man, seniors are gonna pay for this

 

Howdy,

Egypt is spooking the whole world. Not sure how much is impacting the POG. It seems to want to go up anyway. Tough to tell but the latent demand may be putting in a floor. This is what's been happening all thru this current bull run. Everytime gold pulls back, for whatever reason, buyers come in from all quarters and start buying. Sometimes this has been major buys, but most often it's just the sum total of demand from various places. You've got gov'ts still buying whatever the IMF is selling and I would presume there would be major buyers for any CB sale. You've got institutional buyers trying estabish a core gold holding and this same applies to individual plain vanilla investors. Most decent advisors have been on board for a year or so. You've got folks like us. And you've got survivalists. Oh, and industry. Anyone I leave out. BTW, curious fact I learned. Silver is a better conductor than copper or gold. Gold's not that great but is used for plug-ends because it doesn't corrode. Recall that unlike silver, gold doesn't tarnish.

and so it goes,

peace,

rono

 

Gold's conductivity is not that great compared to silver, perhaps, but it is nonetheless Number 3 in conductivity among the elements.

 

January, 2011 ASE bullion sales - 6.4 million. Beats previous monthly record - November last year - by 2 million.