Ethanol Stocks Struggle as Scrutiny Increases
September 21 2011 - 8:16AM
Marketwired
The ethanol industry continues to face scrutiny from the media. The
favorable US governmental policies that promote corn being used by
US-based ethanol plants have sent corn demand surging, leading many
analysts to argue that ethanol is -- at least partially --
responsible for the higher corn prices in recent years. The Bedford
Report examines the outlook for companies in the Ethanol Industry
and provides investment research on Pacific Ethanol Corporation
(NASDAQ: PEIX) and Archer Daniels Midland Company (NYSE: ADM).
Access to the full company reports can be found at:
www.bedfordreport.com/PEIX
www.bedfordreport.com/ADM
Last week a hearing of the House Subcommittee on Livestock,
Dairy, and Poultry focused on the limited feed availability and
resulting higher feed costs. The panel accused the ethanol industry
as a key cause of livestock/poultry producers' dipping profits and
a coming rise in consumer prices. Steven Meyer, President of
Paragon Economics, an Iowa-based livestock and grain market
analyst, argues, "subsidized ethanol has meant record high corn
prices, record-high costs of production for meat and poultry,
resulting lower per capita meat and poultry output and, finally,
record-high meat prices. The U.S. pork industry lost $6 billion in
equity from 2007 through 2009, but improved profitability did not
stop the exodus of pork producers in 2010."
The Bedford Report releases regular market updates on the
Ethanol Industry so investors can stay ahead of the crowd and make
the best investment decisions to maximize their returns. Take a few
minutes to register with us free at www.bedfordreport.com and get
exclusive access to our numerous analyst reports and industry
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New EPA regulations set forth this year have likely solidified
ethanol's future in gasoline. The EPA approved the use of up to 15
percent ethanol in gasoline in vehicles produced during 2001-2006.
The EPA had already approved the 15 percent ethanol tolerance for
vehicles made in 2007 or later.
Archer Daniels Midland said net income for the most recent
quarter was $381.0 million, or 58 cents per share, compared with
$446.0 million, or 69 cents per share, in the year-ago quarter.
Archer Daniels explained that profit from making ethanol was up
sharply, but that was offset by escalating costs in other
businesses, including sweeteners and starches that also rely on
corn.
Pacific Ethanol reported revenue of $215 million, up from $77
million in the second quarter last year. Total gallons sold were
100.6 million for the second quarter of 2011, an increase of 54%
over the 65.4 million gallons sold in the second quarter of
2010.
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