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I am not sure it is sound to invest in any of the ethanol stocks, as I think there are an additional set of risks that are not yet built into the share price:

One issue is that if we converted all the corn on the United States into ethanol, it really wouldn't put much of a dent in the total fuel needs of the nation. Also, land that could be used for food production is then used to grow corn for fuel, whereas fossil fuel development is already in place and rarely takes up land that has rich soil. Another issue is transpiration; corn uses up really large amounts of water; something on the order of 90% of the water used on to grow corn exits the plant and goes into the air. The cost of watering and maintaining this crop is one of the reasons that the U.S. government subsidizes it so heavily, and of course the tax payer ultimately picks up the tab on that one, so now you'll pay twice for your fuel without even knowing it - at least as first.

Another problem is the carbon footprint of ethanol is not much better than oil, and the other toxic emissions from fossil fuels are replaced by ozone, which is great in the upper atmosphere but dangerous for the lungs at ground level. I am concerned that the GOP party, with such strong ties to big oil, will pull the rug out from under ethanol developers in the not too distant future by plastering these unflattering tidbits allover the news, and then the search for something cleaner will cause the money in ethanol to dry up quickly. It would be really easy to do, and unfortunately, if I were a CEO of Exxon or the like, I would almost owe it to my shareholders to sink this ship. It already appears that wind farms make far more sense, and I find it hard to believe that the government doesn't already know this.

By the way, if this tactic were used and ethanol was then perceived as snake oil, other markets will take an absolute shelling as well. Shorters would have a field day with anyone companies producing corn syrups or sugar cane, because any fields that weren't then quickly comverted to a more useful crop would look for another outlet for their corn, and so the price of natural sweeteners would plummet due to a large surplus.

The only thing that could protect ethanol from such a fate hasn't been done yet, but there are people working on it. Ethanol can be extracted from plant material that often has little use to anyone, like switch grass. Discovering how to break down the tough fibers of switch grass would give you access to fuel without tying up farm land, as it can be grown in pretty tough conditions. Unfortunately, no one has figured out how to break down the fiber without using expensive, highly toxic chemicals. Scientists are looking closely at "jungle rot" to see if they can figure out how it works. If they do, and can use the process on a large scale, ethanol could be fairly successful. Without it, it seems fairly likely that certain conservatives, perhaps with a little prodding from oil lobbyists, would level an industry that many see as part of the environmental movement, and which most would identify with the left in this country, so they could do it both for financial reasons and to derail the goals of their Democratic rivals by damaging their credibility.

Therefore I can understand playing this horse for the moment, but long term just doesn't make much sense. Perhaps a stop loss isn't such a bad idea, since it's legs could be taken out from under it virtually overnight by a swift media blitz using negative studies that already exist.
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The EPA requirements adding ethanol to gasoline and the "alternative fuel" drive that Bush has been pushing is a gimme to the corn farmers in the middle of the country who, due to our rather odd electoral process, hold disproportionate sway in national elections.  Most corn is actually produced by giant agribusiness corporations that are extremely appreciative (read:remunerative) too. 

Oil companies,especially those with refining capacity, are unfazed. They'll gladly sell less oil at a higher price and greater total profit (neat how they pulled all this off).

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Hmmm...interesting. And big oil would choose another burning fuel, while real solutions to clean energy - wind farms and water generated power - would be a real threat to them.

I also do not like the fact that corn is subsidized, which gives that  market an unfair advantage going forward. Lobbyists for the sugar cane empire have been been able to change that. The artificially cheap prices that result from the government handout is what spurred the explosion of high fructose corn syrup into the U.S. diet, and also happens to coincide with the large rise of diabetes and obesity here.

The food industry lobby is really powerful and wants cheap sweeteners, and another reason corn will not stop receiving this special treatment is the fact that most cattle farmers here use it as feed. Cows do not normally eat corn, which is why antibiotics are used  (and pharmas benefit from this so they also have a stake), but shipping hay in mass quantities to large herds is too costly (corn is dense, easy to ship and cheap) and takes up alot of space, and so you end up with so many parties with a stake in the future of corn that you cannot unravel one from it without some groups getting burned.  

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  Wind power?   You mean something that people pay for once and then have their own source of energy for the rest of the functional life of the machine?   No no no!!   We insist that it be oil or coal or ethanol... anything that we can sell to you constantly (we need a renewable income stream).  And it must have a dynamic price...something that fluctuates constantly and dramatically for a myriad of reasons.

  And don't get me started on solar power.  That sucker is thousands of miles away.  Oil and corn are practically right under your feet. 

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Yeah, wind power would be great. An expert on All Things Considered pointed out how little space they take up, and calculated how many would be needed to generate power for cars, homes, etc. and then went in to point out how many war planes the U.S. generated over the course if the last year of World War II and it was absolutely ridiculous. We could probably cut our fossil fuel dependancy down pretty quickly if lobbyists didn't have so much power here.
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