Category: Articles

The U.S. Department of Agriculture released the May agricultural prices report yesterday at 3 p.m. and corn prices, at $3.48 per bushel, were up 9 cents from last month, $1.31 above May 2006 and 4 cents above February and March levels. The report measures the average prices received by farmers for corn and other crops

Farmers and other agriculture experts expect corn prices to continue to rise as ethanol producers like Archer Daniels Midland Co. (ADM) and Pacific Ethanol (PEIX), Verasun (VSE) and The Andersons (ANDE) drive demand for corn. Investors had expected the high corn prices to hurt profits at ethanol producers but in fact all but Verasun correctly hedged against the spike and actually reported an improvement in corn processing results despite never before seen high corn prices. ADM actually reported a 15% improvement in corn processing operation in Q1 2007 despite the then record prices. The increase in prices seems to have actually helped corn processors as they were easily able to pass along the increase to end users of HFCS like Coke (KO) and Pepsi (PEP)
Ethanol producers are in a very unique position to hedge against input price increases. Further corn prices increase, based on results over the past year, far from hurting profits should actually helped them. It would seem the only danger ethanol producers face is rapidly falling oil prices but with an active (surprise!!) hurricane season being forecast, that is not likely to happen anytime soon.

After hovering around $2 a bushel for about a decade, corn prices have vaulted past $3. Last month the average price per bushel of corn was $3.20, up more than 50 percent from $2.11 in the same month last year. The elevated corn prices have driven up prices of other commodities as farmers dedicate fewer acres to crops like beans and grain. The USDA expects corn prices to peak at $3.75 a bushel by 2009 and then begin a steady decline after that.

About 90.5 million acres of corn are expected to be planted this year, up 15 percent from 2006 and the most in over 60 years.

MarketWatch reported Thursday:

Bank of America (BAC)downgraded four ethanol makers, giving three of the companies sell ratings, on concerns of a 70% slide in margins by 2009.

While record gasoline prices have led to a 30% increase in ethanol prices and a 180% jump in production margins so far this year, analysts at the bank said they expect producers “will face an extended period of deteriorating margins resulting from new ethanol capacity.”

Starting this quarter, 1 billion gallons of new capacity is scheduled to come online each quarter through at least the fourth quarter of 2008. The new supply could depress ethanol’s premium to gasoline, drive corn prices higher and pressure distillers’ grains values, Bank of America said. The Andersons (ANDE ), VeraSun Energy (VSE ), Pacific Ethanol (PEIX ) and Aventine Renewable (AVR ) were all downgraded.

Here is the mystifying part. For two years we have been hearing that ethanol is not the answer because we will never be able to replace enough gas to make a difference. Now we are talking about an ethanol glut? Let’s make up our mind here folks. If ethanol priced drop far below that of gas, demand will pick up immediately, especially with the increase in E85 vehicles coming online. Right now it is only blended in 3% to 4% of all gas, the goal is 10% so there is still plenty of room to grow. Wal-Mart has been talking about installing E85 pumps all over the place but supply problems currently prohibit it. A glut? WalMart (WMT) will gladly take it, they could use the good PR. If prices drop far enough, there will be an inevitable consolidation in the industry in which case the strongest players will pick up cheap production and make up for smaller margins with increased output.

Let’s talk politics. Does anyone really think anyone running for the White House is not going to woo Midwest voters by promising higher ethanol mandates and more support for producers? Don’t you think the battle cry will be “let’s spend the money here instead of Iraq”. Now whether you agree with the policy or ethanol or not is irrelevant, the reality of the situation is. This industry has the support of the American people and Lawmakers, it will be just fine.

First things first. I have no position and never have in Google (like most tech). I could care less what the stock does. Again, great company and great products and I use them everyday.

Now, am I the only one who could go the next 6 months without reading another Google article or post? Holy Christ, I am seeing 20 a day on the same topic. This stuff is not even original content, just the same news rehashed over and over and over… Enough is enough kids. There is such a thing as overkill and the Google (Goog) coverage hit that 6 months ago. Google taking search share stopped being news in 2006, I do not need to see it 15 times when they announce it EACH MONTH.

I am waiting for twenty posts tomorrow about what CEO Schmidt ate for breakfast and what color it turned his stool, where I can find the video on Youtube and how this is just another brilliant marketing ploy. Once again, Google originality on display

We all know what is going on. The stock has been stagnant for 8 months now while the DOW and the S&P have raced to record highs almost daily. You can’t understand why and feel the need to remind everyone how great the company is, DAY AFTER DAY AFTER DAY. Here is the problem, we all already know that. That is not the reason the stock is stagnant.

The law of large numbers is. As % growth declines as a company grows increasing larger (this is an undeniable trend), the multiple investors will pay for shares also decreases. That is what is happening to Google. That is it.

It is not that folks do not “understand” it or “hate” it. People are now at the “show me” stage of Google growth, not the “don’t worry, it will happen” stage. If Google performs, so will the stock, if not, it won’t. Period. No conspiracy, no short sellers, no confusion by the unwashed masses.

I need to go, there are 43 articles on “Google Gears” clogging my inbox. I need to get rid of them before Schmidt eats lunch and that coverage starts

The Wall St. Journal reports this morning that Coke (KO) and Cargill are trying to get FDA approval for a new sweetner called Reninia. It comes from an herb called Stevia which is native to Paraguay. The duo currently face stiff opposition to it’s as neither the European Union or the FDA have approved it and that process would most likely take several years. According to The Journal, a potentially damaging “1985 peer-reviewed study on rats published in Proceedings of the National Academy of Sciences concluded the herb could cause mutations in the liver. Some European food-safety officials have cited concerns about a lack of data on the herb’s safety, amid indications it could lead to fertility problems in men.

Cargill, who admittedly has already spent “significant amounts” of money on the project is hoping the herb will “shake up” the sweetener market. Word is that coke has no plans to tamper with it’s “Coke Classic” formula, learning from it’s 1980’s fiasco so I am left wondering if this will ever be more than just another aspertane, sucralose, saccharin niche product. Folks are very particular about their beverages and will resists any change so I am highly skeptical that it will replace or make a dent in HFCS demand anytime soon.

Perhaps the most immediate reason to be concerned about the product? The herb has become fashionable in Hollywood. On her blog, actress Mariel Hemingway has posted a recipe for a morning shake that recommends mixing in stevia for added sweetness. Correct me if I am wrong, but isn’t this the same actress that suffers (or suffered) from bulimia, anorexia, and depression? So, I am supposed to put anything she recommends into my body?

This stuff looks like it will make folks long for the days when their soft drink just made them fat.

In March I wrote a post about AIG (AIG) and that it’s profit picture was not a rosy as it looked due to some questionable tactics. Now a report comes that they are being forced to return “excess profits” to the state of Massachusetts. HMMMMMM.

AIG, who carried the workers compensation for the “Big Dig” in Boston, recently reached a settlement with AG Martha Coakley in which they agreed to return almost $60 million in “excess profits” and interest to the state. In the original agreement with the state, AIG was guaranteed a limit on it’s potential losses due to the “high-risk” nature of the work and in return, was required to return and excess funds to the state. The AG’s office that AIG never returned these funds to the state. According to AIG, the funds were recently paid.

For those interested in the Lead Paint trials, the City of Milwaukee’s suit against NL Industries (NL) has begun. For the single best day to day converage, there is only one place for you to go…

Visit Jane Genova’s blog Law and More. Jane live-blogged the RI Trial and will present us with the most accurate depiction of events in Milwaukee. I highly advise those interested check out her blog daily.

Here are the Top 10 percentage dividend increases last week

Lowe’s (LOW) = 60%
LMP Capital (SCD) = 40%
Clorox (CLX) = 29%
Monroe Muffler (MNRO) = 28.6%
ARK Restaurants (ARKR)= 25.7%
Omnicom (OMC) = 20%
Assurant (AIZ) = 20%
TansAtlantic Holding (TRH) = 18.5%
SEI Investments (SEIC) = 16.7%
Abington Bancorp (ABBC) = 16.7%