Ethanol Stocks Hit New Lows

A buying opportunity?

Sector Snap: Ethanol stocks hit new lows

NEW YORK (AP) – Ethanol stocks fell Tuesday, with several hitting 52-week lows, as a Bear Stearns (NYSE:BSC) analyst rehashed concerns which promise to plague the industry in coming months.

Among stocks hitting their lowest point in a year were US BioEnergy Corp. (NASDAQ:USBE) , which fell 73 cents, or 8.2 percent, to $8.20; Aventine Renewable Energy Holdings Inc. (NYSE:AVR) , which fell 67 cents, or 6.1 percent, to $10.30; Pacific Ethanol Inc. (NASDAQ:PEIX) , which fell 44 cents, or 4.9 percent, to $8.76; and Verasun Energy Corp. (NYSE:VSE) , which fell 50 cents, or 4.4 percent, to $10.75.

Bear Stearns analyst Ann Duignan noted supply and demand concerns facing the renewable fuel in a note Tuesday that outlined a conference call with several ethanol players.

To answer my opening question, no, I don’t think it is a buying opportunity. There might be a short-term bounce as investors do come in bargain-hunting, but I don’t think long-term this is a place you want to be. And I am only interested in long-term.

Are we going to use more ethanol in the future? Yes, it is mandated that we must. But no company is in a position to gain much of an advantage in that marketplace. Unlike some of these analysts just now jumping off of the bandwagon, I warned you about this over a year ago:

The Ethanol Bubble Has Burst

Of course now that ethanol values have fallen by 60-70%, some analysts suddenly start issuing warnings. Nice call.

Disclaimer: I don’t directly own any ethanol stocks (it is possible that one of my mutual funds contains some ethanol stocks) nor have I shorted any ethanol stocks.

10 thoughts on “Ethanol Stocks Hit New Lows”

  1. Oh no! The Ethanol Bubble has burst! Talk about someone that doesn’t like Ethanol stock. Ethanol is still in its beginnings even though Ethanol was around 100 years ago. I really don’t think you truly believe Ethanol is over. We have no alternative for fuel, Ethanol is the ONLY alternative, like it or not. I’m happy that Ethanol stocks are falling, I hope they keep falling until next Spring. I will own a ton of stock in everyone of the Ethanol companies if this happens. And in 10 to 15 years, you can talk about how you could’ve invested in Ethanol when it was under $10/share just like all those people that could’ve had shares in Exxon or Texaco when it was under $10/share. And yes, Ethanol is not going away no matter how much you want it too.

  2. I think with stock prices going down we are going to see more consolidation…. companies that only own 1 to 5 plants will sell to the big players. ADM I think will be a big buyer because they have been passed by Poet in ethanol production.

  3. Anonymous, I agree with you on this. There are so many companies out there right now fighting to get a foot-hold. This happens whenever there’s a new demand for a product. What you’ll probably see in the next 5 years is for every 3 Ethanol companies that exist now, those will either go under or be taken over by the most profitable Ethanol companies like USBE and PEIX or by companies like ADM. It’ll be interesting to watch. Hopefully, all of us will make money on whatever happens.

  4. We have no alternative for fuel, Ethanol is the ONLY alternative, like it or not.
    LOL! You say it like you actually believe it. Nice. I guess in the heat of the moment you forgot about: biodiesel, green diesel (and gasoline), electric cars, CTL, GTL, LPG, LNG, etc. etc.

    And yes, Ethanol is not going away no matter how much you want it too.
    Please stop! My stomach is beginning to hurt. Go ahead and invest big guy, it’s your shirt.

  5. Ethanol stock may very well go up. Nevertheless, there are real-world physical constraints on how much biomass (and energy) we can dedicate to ethanol production. It would be a mistake to think biofuels are going to prop up the system that oil has built.

    BTW, assuming that Robert reads the comments, I would be interested in his take on abiotic oil, specifically Engdahl’s switch to the abiotic oil camp.

  6. The discovery of oil below basement rocks proves that not all oil is biological in origin. It doesn’t prove all oil is abiotic, just that some of it is.

    Biofuels, including ethanol, have serious scaling problems, and most of them displace food production, which is going to limit their expansion even further.

    Electric vehicles require electricity. Merely recharging PHEV-20 (battery range of 20 miles), if all passenger cars were converted/replaced, would take half of the contagious US’s generation capacity.

  7. larry, larry, larry

    Why do you keep posting about PHEVs without doing your research? Here is clue #1. Figure out the difference between capacity and generation. Then you can start posting again.

  8. It looks like “Big Ethanol” has stolen a play from the Global Warming crowd. They are labeling companies as “ethanol deniers”.

    I’m surprised to see a hit piece like this in Business Week:
    Big Oil’s Big Stall on Ethanol

    I would expect this from Grist or Mother Jones, but Business Week? The editors must have been on vacation.

    By this same logic, I think veggie burgers are better for my health and the environment than beef. Big Burger (Burger King, McDonalds) is denying the benefits of veggie burgers keeping them off its menu. TGI Fridays makes a pretty good veggie burger. McDonalds should be forced to carry TGIF’s veggie burger. So what if only a few people actually eat veggie burgers. No matter, they are just better, because the people who make veggie burgers say so. And we certainly unbiased, just take our word for it.

    Oh and buy the way, I am not supportive of veggie burgers because I bought a lot of veggie burger stock last year. Nope, I’m a health nut and would support veggie burgers even if I didn’t spend a bundle on veggie burger stock which is now worth 1/2 of what it was just a few months ago. Come on really it just isn’t fair! McDonald’s give me a break, you sell billions of meat burgers, can’t you spare just a corner of your grill to make TGIF’s veggie burgers. How can you be a veggie burger denier? I bet the farm, on veggie burgers, literally. Now just because the market for veggie burgers has been saturated, why should I suffer alone? You, McDonalds need to bail me out and share a little of my pain. No really please!!!!! Is anybody listening? Is there a politician out there that can fix this? Come on, really I’m serious.

  9. KoK–

    Oh no! The veggie burger boom has burst! Talk about someone that doesn’t like veggie burgers. We have no alternative for hamburgers, veggie burgers are the ONLY alternative, like it or not. I’m happy that veggie burger stocks are falling, I hope they keep falling until next Spring.

  10. Ethanol will give the US power and eliminate the power that OPEC countries now have. So on a military perspective, Ethanol is the best ammo. So look for the US government to do whatever it needs to make sure that every American is using it by 2030. Electric Cars? They’ve been around for 30+ years, unless there is an electric cars that can go 120MPH and can travel 500 to 1000 miles before recharging, don’t look for electric cars to catch on to lazy Americans. As far as the crops go, the prices will go up and I’m not sure that’s a bad thing. What would you rather do, give the money to big oil companies or to the American farmers? OPEC is on the way out in this country and they know it, just listen to their comments about Ethanol and alternative fuels. The countries that produce oil for OPEC will go back to the countries they were 150 years ago.

Comments are closed.