Daily Biofuels Summary for September 21

Top Story: The non-profit group Environmental Defense released a report predicting that the increase in Midwestern ethanol production could place an unacceptable strain on the Ogalalla aquifer. The report projected an additional 2.6 billion gallon demand from the aquifer for processing, and as much as 120 billion gallons from added corn production, which supplies water for more than 20% of all irrigated land in the United States, covering an area between Texas and South Dakota.

Producer News: In South Carolina, two Chester County plants continue to move forward in their permitting and planning reviews. The plants use corn and wood-based cellulosic ethanol process….A prominent biofuels investor said that he foresees a shakeout in the ethanol industry, and more consolidation as single plants are either consolidated, fail, or emerge as low-cost producers. He said that the ethanol industry had to urgently reduce costs to be able to survive without subsidies, suggesting that ethanol plants should be prepared to be viable even if the price of oil were to drop to $25-$30 per barrel….In Oklahoma, Mainline Fuels and ICM announced plans for an $80 million 40 Mgy ethanol plant in Guymon that will open in spring 2009. Five other ethanol facilities have been proposed for Oklahoma but only one was finally completed when Spaceport Fuels opened a 1.5 million gallon facility in December 2006….In Illinois, Midwest Agri-Energy is nearing its final permit from the EPA to break ground on its $235 million corn ethanol plant. Company executives said that previous questions of water supply had been successfully addressed….Agriculture Under Secretary for Rural Development Thomas Dorr announced that $18.2 million in grants that would be given to 345 renewable energy projects in 37 states. The program is proving $13.4 million in grants and $4.8 million in guaranteed loans.

International News: In India, sugar stocks have soared as the Sensex index passed the 16,000 mark, as Indian investors revised their projections for the sector in the wake of the Indian government’s E10 ethanol mandate. Companies such as Triveni Engineering & Industries, Empee Sugars & Chemicals, Dhampur Sugar (Kashipur), Balrampur Chini Mills, Gayatri Sugars, Venus Sugar, Rana Sugars, Simbhaoli Sugars, Shree Renuka Sugars and JK Sugar have seen stock price increases of more than 100% in the past month….A Hungarian researcher blamed biofuels for contributing to Hungary’s severe drought this year. The researcher said that farmers that sold stalks and straw instead of leaving them in their fields, as soil requires the cover in order to protect it from drought. Power plants in Hungary have burned biomass to produce electricity.

Research News: A new study sponsored by the American Meat Institute, National Chicken Council and National Turkey Federation has called for an end to ethanol subsidies, saying that the industry does not need the incentives, and that current subsidies are distorting farmer planing and causing a direct increase in food costs. The report says that the US industry would need 200 million tons of corn to support a 100% compliance with an E10 mandate in the United States. The report projects that federal ethanol supports will cause a $34 billion increase in the price of grains in the US. The report also stated that implementing E10 across the country would only displace 2.5 percent of oil imports….Researchers at Iowa State have discovered a process to convert glycerine to viable livestock feed. Glyercine, a byproduct of biodiesel production, has become a glut on markets as biodiesel production has grown….An independent British researcher has proposed “seeding” selected areas of the world’s oceans with iron filings, to promote algae growth that would absorb carbon dioxide and be used to produce biodiesel. The researcher referred to a small-scale experiment conducted in the 1990s which had shown that the process would produce carbon-absorbing algae….AlgaeLink will demonstrate its photobioreactors in the UK in mid-October. Strains of micro-algae consist of up to 70% oil, require only water, CO2, sunlight and nutrients to survive, and can produce far more oil per acre than any other known biodiesel technology. Algae is the fastest-growing plant on earth, blooming at 100 times faster than the rate achieved by trees.

Policy and Policymakers: In Washington, Colorado Governor Ritter called on the US Congress to adopt Colorado’s 20 percent by 2020 as the national renewable energy standard. He said that the country required a national renewable energy standard. State standards, and state incentives to produce renewable energies within state borders to meet those standards, have been blamed for plant closures in states that do not have incentives and state standards and cannot compete with out of state exports that are supported by subsidies….In Africa, a study published by the Africa Biodiversity Network said that current project development and selection practices in Tanzania, Uganda, Zambia and Benin could lead to environmental and humanitarian disaster. The report cited the conversion of one-third of Uganda’s Mabira Rainforest to sugarcane for ethanol production.

Consumer and Fleet News: CPC Corp will convert eight Taiwan stations E3 ethanol-blended gasoline next week. The Ministry of Economic Affairs had recently required 2,000 government vehicles in Taipei to use E3. The E3 program will be expanded to supply 3 million gallons of E3 to the southern regional city Kaohsiung, and expanding to 26 million gallons of E3 Taiwan-wide by 2011….In Portugal, Arriva Portugal will convert its 240 bus fleet to biodiesel. Prio Advanced Fuels supply the fleet’s biofuels.

Financial News: FBR analyst Eitan Bernstein downgraded Aventine (AVR), VeraSun (VES) and Pacific Ethanol (PEIX) as Big Ethanol braced for another fall in stock prices as the analyst proved pessimistic on the chances for a price recovery for ethanol or relief for producers on the cost side. Price targets were reduced more than 50% on all three stocks. Bernstein slashed his price forecast for Aventine from $24 to $9, VeraSun from $24 to $12, and Pacific Ethanol from $15 to $8. The two largest ethanol producers in the country are the privately-held POET and Archer-Daniels-Midland (ADM). Third quarter profit forecasts were slashed for all three by 11 to 18 cents per share, and only VeraSun is expected to show a third-quarter profit. The spot price of ethanol was reduced in his forecast from $2.20 to $2.05….The Biofuels Digest Indexâ„¢ (BDI), a basket of 21 major public biofuel stocks, fell 1.49% to 98.67 as enthusiasm over the Fed rate cut waned and investors picked up on their steady flight from Big Ethanol stocks. Among biofuel stocks, losers led gainers by 5 to 2, but Big Ethanol faced strong declines as Aventine (AVR) dropped 1.11%, VeraSun (VSE) dropped 4.49%, Pacific Ethanol (PEIX) dropped 8.42% and Archer-Daniels-Midland (ADM) fell 1.15%. Microcaps recorded a mixture of losses and gains, with Environmental Power (EPG) up 6.33% on news that it has agreed with the Benham Companies to construct a major biogas project in Nebraska Facility. Green Energy Resources was up 14.71% to $0.195, while Texcom (TEXC.PK) lost 21.21% of its value to fall to $0.13. A New York Times editorial on the “discouraging” economics of corn ethanol contributed to the sector’s gloom. In the broader markets, the Dow Jones industrials lost 48.86 points to 13,766.70, the S&P 500 fell 10.28 to close at 1518.75, and the Nasdaq fell 12.19 points to 2654.29

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