Burning the Food Supply
by ilene - October 30th, 2010 8:20 pm
Burning the Food Supply
Courtesy of Joshua M Brown, The Reformed Broker
Farmer Brown here…if no one else is going to tell this story, then I might as well.
We do some stupid stuff here in America – playing ultimate frisbee on skis, deep-frying Oreos, calling in to vote for televised dance show contestants…I could go on and on.
But of all the stupid things we do, one of the most dangerous is this ethanol nonsense, in which we gleefully burn up our corn supplies. For very little in the way of environmental impact I might add.
First, look at the December 2010 corn contract, then I’ll give you some insane stats on the demands of ethanol:
You wouldn’t believe it, but according to the most recent estimate from the USDA, corn use for ethanol for the 2010-2011 corn crop will be 37 percent of the projected total harvest. More than a third of our corn supply will be refined for energy use. We’re talking about 4.7 billion bushels of the corn that would normally go to animals as fodder and to our own diets.
And while yields and production are up, corn races to ever higher prices. There’s a good reason for that – industry experts say that we now need to produce 13 billion bushels each year just to keep prices restrained.
The stats above are mind-blowing and to me they represent the bull case for agriculture stocks and commodities in general.
They also represent a society that has become oblivious to the danger right in front of its face. I believe that resource competition between the developed and emerging nations is a given for the coming decade. While many believe this competition will center around oil, I’d be more concerned about the global demand for more and better food.
One of the most important determinants of animal protein prices is the corn fodder that supports production. And we’re mixing this critical element of the food supply into our gas tanks.
One might ask "but if it comes down to it, we can adjust in time, right?"
And the retort might be "if we’ve learned anything from the economic earthquakes of the recent past, it’s that we almost never adjust until it’s too late."
Stupid, stupid, stupid.
h/t David D
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Is Monsanto Worth a Look? Depends on Which Monsanto You’re Talking About.
by ilene - September 12th, 2009 3:54 pm
Is Monsanto Worth a Look? Depends on Which Monsanto You’re Talking About.
Courtesy of Joshua M Brown, The Reformed Broker
Disclaimer: This is not research, advice or an invitation to trade or invest. My comments below are simply some observations based on publicly available information. Do not trade based on anything you read here.
Monsanto (MON) is becoming quite the controversial stock in light of the dichotomy of near-term and long-term outlooks. You could make the case that this is true for all of the agriculture stocks (brutal farm incomes and spending this year but multi-year Ag Supercycle on the horizon).
Let’s look at MON as a microcosm for the ag story at large…
Monsanto’s long-term story is one of the most exciting and imagination-capturing I can think of.
The short version goes something like this:
The planet’s population is not only growing, it is becoming more prosperous. As a result, the emerging middle class (China, Latin America, India, Africa) will be looking to upgrade the food they consume and to include more proteins in their diet. In order to meet this new protein demand, roughly four times the amount of productivity will be required of the available global farmland. The best way to accomplish this is with enhanced seed and genomic technology, which puts the industry leader, Monsanto, squarely in the driver’s seat for this global mega-trend.
OK, this is all well and good, but right now in 2009, the $43 billion dollar company is not quite being driven by the Ag-Tech story, it is instead being driven in part by the results of its weed-killer business, also known as Roundup.
Monsanto put out an earnings forecast this week and had to lower its 2009 and 2010 profit estimates in light of the fact that consumers are skipping the brand-name Roundup product in favor of cheaper generic herbicides.
The company is pegging its 2010 earnings at $3.10 to $3.30 a share, The Street was thinking more like $4.30. Not pretty.
Monsanto’s CEO is telling us that the Roundup business will only be 15% of the profit mix at Monsanto by 2012 as the seed and genomic businesses kick into high gear and go to 85% of profits. The question becomes whether or not you are willing to see through the valley into the intermediate term when this prospect has the potential to become reality.
The analysts I’ve…
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Philip R. Davis is a founder Phil's Stock World, a stock and options trading site that teaches the art of options trading to newcomers and devises advanced strategies for expert traders...
Ilene is editor and affiliate program
coordinator for PSW. She manages the site