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Ethanol

Rafael posted on 12/29/07 at 04:23 PM
 

 

I have been trading at TK for a little over a year but this is my first posting. I'm thinking about putting some money on ethanol stocks on 2008. Does any have any suggestions on some decent ethanol stocks?

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Posted by Rafael on 12/29/07 at 04:23 PM

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JBManning

Member since: Oct 06
Trades 326
Trade Notes 56
Blog Posts 1
Environmental, Safety & Health Specialist
Age: 20's
Houston, TX
JBManning
Posted January 02, 2008 (06:33AM)

Archer-Daniels Midland (ADM) and Verasun (VSE) are probably the most liquid ethanol plays... Ethanol has had a rough 12-18 months. Though the energy policies have mandated an increase in the amount of ethanol usage - the industry has been flooded with start-ups and new infrastructure creating a glut in the market and depressing margins.

 

Some concern has been expressed regarding owning refiners through a recession (if we come to that) - historically, gasoline demand has tapered off during periods of recession. At this point in time, with E85 infrastructure nearly non-existent (at least in comparison to regular gas outlets), ethanol demand maintains a very linear relationship to gasoline demand... but, the supply/demand isn't nearly as tight as gasoline is. To make a long story short, this would lead to even further depressed ethanol margins.

 

These are just my thoughts =) 

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