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Friday, February 02, 2007

Ethanol Fuels ADM's Profits

Archer-Daniels-Midland's (ADM) efforts to move into the ethanol business are paying off so far. Investors bid the shares higher Thursday after the corn processor reported a 20% jump in quarterly profit. U.S. ethanol plants already consumed nearly one-fifth of the corn crop; if all the factories under construction go into operation, they'll eat up no less than half the harvest by 2008 (see BusinessWeek, 2/5/07, "Food vs. Fuel"). But even as surging demand pushes up the price of corn and ADM's costs, the company has been able to increase the prices it charges on products processed from corn like starch, sweetener, and ethanol. Corn farmers are having a rare period of prosperity, and the federal government is getting a break. In 2006, Uncle Sam gave corn farmers $8.8 billion in subsidies. Thanks to high corn prices, subsidies are expected to drop to $2.1 billion in 2007. "All the price-dependent spending is getting wiped out," explains the USDA's Collins. Corn is a lousy raw material for fuel however because producing 10 gallons of ethanol consumes the energy equivalent of about 7 gallons of gasoline, and greenhouse gas reductions are minuscule.
As one reader points out: Ethanol manufacturers are gross polluters. An Iowa ADM processing plant generated 20,000 tons of pollutants including sulfur dioxide, nitrogen oxides, and volatile organic compounds in 2004, according to federal records. EPA considers a plant as a major source of pollution if it produces more than 100 tons of any one pollutant per year, although it has proposed increasing that cap to 250 tons (CorpWatch 2006). With ethanol subsidies going through the roof [$770 million in 1995, $1 billion in 2000 & $8.8 billion in 2006] (Cato 1995, 2007). The gains of ethanol are far outweighed by its economic and environmental costs.

posted by CASFS 2006 @ 10:58 AM

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