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Ethanol


Deciding where to put your investment dollars involves education. Some things are cut and dried, learning-wise. Others, not so much. Right in the middle of the ‘not so much’ category lies ethanol.

Is it good for the environment or bad for the environment? Does it lower costs or increase them? Is mileage with ethanol-blended fuels better or worse? And what about octane?

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Argument Against

For those on the ‘nay’ side of the fence, including researchers from Princeton, the University of Minnesota, Wisconsin and Michigan, data suggests that “corn ethanol’s complete lifecycle emissions profile emits more potent greenhouse gases than gasoline.”

In addition, Consumer Reports found E85 fuel created a 29% decrease in city driving mileage. Car and Driver found similar results (30% drop in mileage).

Finally, an argument exists that, thanks to increasing fuel efficiency, Congress’s mandated levels of ethanol usage will simply never be possible unless we are willing to sacrifice even more gas mileage to reach those levels.

All In Favor

As might be expected, the Iowa Corn Promotion Board sees things differently. Pro-ethanol talking points promoted by Iowa Corn include a contention that ethanol production in 2015 reduced greenhouse gas emissions by 41.2 million metric tons.

In addition, the USDA says the average ethanol plant produces more than twice the energy it takes to produce it and, by a 3 to 1 margin, ethanol production requires less water than gasoline production.

Finally, according to the Renewable Fuels Association, in addition to being renewable, U.S.-based and clean burning, ethanol is the lowest-cost source of octane available.

An Uncertain Future

Ethanol Producer Magazine reported that moderate-to-strong buyer support through the third week of April has pushed corn futures near $4 per bushel.

That said, pullbacks in both corn and ethanol prices late in April has made the market more volatile than usual. Despite the pullback, the magazine noted that underlying price support has been firm.

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Best Bets For Ethanol Players

A decision to invest in ethanol or an ethanol-related industry likely depends on the degree to which you are persuaded the investment makes financial sense. For those who choose to jump in, WooTrader’s analysis of several ethanol and ethanol related stocks could be very helpful.

At the top of the current list sits Pacific Ethanol Inc. (NASDAQ:PEIXD). Pacific Ethanol markets ethanol in the Western United States. WooTrader currently rates the stock “Outperform” and Zacks gives it a “Strong Buy.”

Adecoagro SA (NYSE:AGROC) operates in South America and is engaged in a variety of agricultural products including ethanol. Another WooTrader “Outperform” rating and Zacks “Strong Buy” for this stock.

Brazil’s leading global ethanol and sugar company, Cosan Ltd (NYSE:CZZB) produces ethanol from sugarcane, not corn. WooTrader rates Cosan Ltd as “Perform” and Zacks has a “Buy” rating on the stock.

Kinder Morgan (NYSE:KMIC) is involved in energy transportation and storage in North America. Far from a pure-ethanol play, Kinder also handles natural gas, refined petroleum products, crude oil, coal and carbon dioxide (CO2). Kinder is rated “Perform” by WooTrader with “Buy” ratings by both Zacks and TipRanks analysts.

Vertically integrated producer, marketer and distributer of ethanol, Green Plains Renewable Energy Inc. (NASDAQ:GPREC), produces wet and dried distiller’s grains and non-edible corn oil in addition to ethanol. “Outperform” says WooTrader. “Buy” says Zacks.



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