Ethanol problems
However, Heminger explained that there are several problems with ethanol.
Ethanol itself creates environmental concerns because of the way it is made, Heminger said.
"One bushel of corn makes 2.8 gallons of ethanol," said Heminger. "But it takes five gallons of water to make one gallon of ethanol," which could have an impact on water supplies.
"Just watch " that (water) will be the key issue you'll see on ethanol," Heminger said.
Heminger also said that mixing ethanol with gasoline isn't as simple as pouring the two substances together and stirring. "You can't get it to blend right" if you "splash-blend" in such a way, he said, because of separation problems involving ethanol and water.
Ethanol also cannot be transported by pipeline, and is "only 67 percent as efficient as a pure hydrocarbon," Heminger said.
And, not all vehicles can run on ethanol-based fuel. In fact, relatively few in the United States can run on E85, which contains 85 percent ethanol and is used widely in Sweden.
"There are 230 million cars in the U.S. and four million of them are flexible-fuel vehicles. We estimate it takes about 15 years to turn over a fleet. So you have this huge pool of vehicles that cannot run on E85," Heminger said.
Those who try to use E85 in older vehicles that cannot handle it will void their warranties and cause potential engine damage.
He also noted that last year ethanol sold, on average, about $1 higher than regular gasoline.
In addition, Heminger noted that "we use about 25 percent of the U.S. corn crop right now to get the 10 percent blend" of ethanol in gasoline that's widely sold now.
The increasing demand for corn, in turn, is helping to drive up the cost of things like livestock feed, which is pushing up prices for poultry, beef and other meats, Heminger said.
When asked why more emphasis has not been placed on hydrogen as a potential alternative energy source, Heminger said that technology has not caught up with the concept.
"The technology isn't there yet. I think the next step is taking energy imbedded in plant materials (an idea that Bush specified in his State of the Union speech) and going from there. It'll be more like 2030 or 2040 time frame before we see (hydrogen energy) start to develop," he said.
I will post link to the full story in the Courier when it falls off today's page.
Solid blog entry from Dan:
Something that should be of interest to our readers is the current developments in the grain markets.
As you know, during most of the commodity-wide rally that has taken place over the last few years, the grain sector has been a relative laggard when compared to the extent of gains we have witnessed in some of the other sectors. Several market analysts have commented on the fact that when grain prices were compared to the commodity sector as a whole, they were actually quite cheap in historical terms.
Today the USDA issued a report which sent shockwaves through the entirety of the grain complex but especially the corn market. The report on crop output and usage estimated that old crop corn ending supplies in August of this year will be roughly the equivalent of three weeks of corn usage. That is simply staggering! Corn immediately responded by opening at limit bid and as of the close today, there remains an estimated 90,000 or better bids to buy at the limit price. That suggests corn will open limit up this coming Tuesday barring any unforeseen developments over the weekend.
The reason I mention this to our readers is that the rally in the grain complex is the market attempting to adjust to the new source of additional demand for corn in ethanol production something which is not a flash in the pan kind of demand that comes and goes but rather a wholesale change in the supply/demand structure of the corn market. There is a spillover effect that has caused both soybean and wheat prices to rally as well.
The implications for this are enormous on the food chain here in the US. Corn is the primary feed source for the broiler and the livestock sector. Along with feed wheat and soymeal, the increase in price has a significant effect on the profitability of chicken, hog and cattle producers. Simply put, those guys are in direct competition with ethanol plants for available corn. The rising cost of corn has taken a huge toll on their profit margins and threatens the livestock and broiler industries. The only way they are going to be able to maintain current levels of production is to receive higher prices for their finished product since the cost of the grains to feed them is at a new higher level which looks to be here for some time. That in turn is going to require the packers being able to get higher prices for meat and chicken at the wholesale level so that they can offer more money to the producers. Of course, it goes without saying that prices must rise at the retail level to keep grocer margins profitable as well. In other word, brace yourself for higher meat and chicken prices in the months ahead.
Additionally, cereal makers, bread makers and anyone else that uses grain to make a baked or finished product of some sort faces the same predicament. They are going to have to charge higher prices to compensate for the increase in their input costs.
All of this is going to feed through into the food sector and translate into higher prices at grocery stores and restaurants. Consumers are going to see higher food bills Period! The pencil pushers at the Commerce Department can massage and manipulate the data used to concoct the worthless CPI and will attempt to hide it, but real world experience is going to impact directly on the pocketbooks and wallets of Americans visiting the grocery store.
While the recent setback in the energy sector has taken some of the burden off of consumers from the high gasoline and heating oil prices seen earlier this year, higher food costs are on their way. Once the temporary surplus in gasoline and distillate stocks gets worked off and energy prices resume their uptrend or we get another surge in prices due to some sort of 10 sigma event, a double hit is going to be felt here at home.
I won 1st place last night from a short stack position. Woo hoo! Shawn hosted and I wish him and Anne the best of luck in Texas. They fly down today to look at houses.
This past weekend Doug and I headed up to Big Powderhorn Mountain to go snow skiing. We originally planned to travel to a closer resort but there was either no snow due to the unseasonably warm conditions or freezing rain predicted. Our first choice was Whiteface in upstate New York. However 3,430 feet of vertical drop with a base covered by freezing rain didn't sound very safe (considering our snow skiing skills).
We traveled to Marquette Michigan and stayed over night on Thursday evening. The Holiday Inn in Marquette has a huge pool and hot tub, which was especially appreciated after such a long drive. Marquette is really nice city right on Lake Superior. The UPers were very friendly and warned us about the trolls that live below the Mackinac Bridge (i.e. in the lower peninsula of Michigan). Doug liked the UP a great deal and didn't hold it against them that they were part of Michigan.
Friday we finished the drive to Big Powderhorn Mountain and checked in. The resort was a ghost town (since it was the weekend after New Year's weekend). We were allowed to check into our chalet early, which was older but very nicely maintained with fireplace and hot tub. We skied until the slopes closed at 4PM, which seemed pretty early, considering it was light until at least 5:15. We drove over to Copper Peak to check out the huge ski flying jump (which is the largest ski jump in the world). It looked like it wasn't well maintained and a bit of an eye sore so I didn't take any photos. For dinner, we went over to the Black River Valley Pub & Grub for their fish fry and their grilled catfish special was excellent. They even had a live band which was definitely the best cover band I have heard in a long time.
Saturday, we skied another full day. Ask Doug about his shortcut between hills that we had to slave around a lake and back up hill. He lost his pole and had to do it again! Conditions were slightly icy but not bad. A bad day of skiing is still better than a good day at work. For lunch we ventured to find the Powdermill Tavern (which was within the Powdermill Inn) despite all the advertising for $3 pizzas nobody seemed to know where the place was.
We finally found the Powdermill Tavern and almost left thinking it was closed due to lack of patrons. It was beautiful three story wood bar that was past its prime. We learned quite a bit about the area from the bar tender while we drank our beers and eagerly awaited our pizzas. The area was a mining mecca back in the day. Most of the iron ore for WWI and WWII came from this area.
The ski jump we visited wasn't maintained and Copper Peak has tons of copper but not in high enough concentrations to make it economically feasible. The loss of mining hit the area hard and the transition to a vibrant winter sports destination was very welcome. There used to be snow November April making for an ideal snow season. However, in recent years they are lucky to have snow by Christmas and it will melt off by mid-March. This explained the plethora of real estate for sale in the area. I wonder what will be the next economic boom for this area, especially since 2007 is predicted to be the warmest year on record.
Sunday, we ventured back and completed the drive in 10.5 road hours as measured by my A6.