Ferrari Mailing List: Re: Illinois speed traps

[Hans E. Hansen (FList]

On 8/9/08, Ferrarisimo [at] Comcast.net <Ferrarisimo [at] comcast.net> wrote:
>
> On Aug 9, 2008, at 5:57 PM, Hans E. Hansen wrote:
>
> >
> > Hans.  (Who was part of the problem, holding energy futures
> > during the run-up.)
> >
> >
> You Bastard!   : o
>

Thank you, thank you.  And now for my next act.....

The handwriting was clearly on the wall for the recent turn-around
in energy futures - in particular natural gas.  However, I'm way too
much of a coward to short the energies.  All you need is some
whacko weirdo in the mideast to do something bad and your
short position is under water in a hurry.  I'm short gold, but that
doesn't have quite the level of volatility as oil.

As an aside:  Food for energy.  This is to some extent crap fear
mongering from eviroweenies and liberal politicians.  Corn used for
ethanol is not the corn that we eat.  We eat "sweet corn", which
is only a very tiny percentage of the corn grown.  The bulk of what
we raise is referred to variously as "field corn" or "feed corn", and
it is - and always has been - used for two purposes:  industrial
chemical production (including ethanol), and feeding livestock.  We
don't nor ever had a shortage of sweet corn.  The use of feed corn
for increased (note that I said "increased", as this corn has always
been used industrially) ethanol has certainly contributed to rising
meat costs, however.

However, and most don't realize this, recent high grain costs are
mostly attributed to widespread crop failures in recent years.  It's
decreased supply, not increased demand, that  has driven up prices.
But this has changed.  For the most part, grain crops are on the path
to normal-to-above-normal yields on a global basis this year.  Now that
the size of current crops has been digested by the marketplace, prices
have been tumbling.  Rice from 2280 to 1600.  Wheat from 1285 to 790
(this is SRW, the other types have had similar price crashes), corn
from 800 to 510, and soybeans from 1640 to 1180.  While wheat
and corn are getting somewhere near normal levels, beans have
a long way to go and look like they are falling rapidly back to typical
prices.  They are an excellent short, even after all they have fallen.
Rice was extensively hoarded during recent shortages, and now
that it is readily available again, there is lack of demand as individuals
(and governments like the Philipines which doubled the size of their
normal purchases during  the shortage) use up some the large
quantities that they set aside when it looked like there was no supply.
(Stores in Vietnam had a 300kg (600lb) per person limit on
purchases, and with several members of each family going thru
the checkout counter, many accumulated tons.   With families
buying this kind of bulk, how much do you really think they
will need in the immediate future?)  These markets are in major
bear mode and look to fall a long ways farther yet.  Will they
fall all the way back to historically normal lows (like 200 corn)?
Doubtful, as farm inputs have risen considerably.  But we should
see prices that are historically more typical.  I'd bet on 300-400 corn,
700 beans, 500 wheat, 1200-1300 rice.

Also, using relatively expensive corn for ethanol is likely nearing an
end anyway.  By "forcing" the industry to adopt ethanol, new
technologies are coming out of the woodwork.  Scrap vegetation,
like corn stalks, etc. is experimentally being converted to something
fermentable by enzymes, and a company recently went commercially
online making ethanol via bacteria (instead of yeast) out of all manner
of junk, including used tires.  The factory Corvette racing team buys
their ethanol from this company.  These technologies in the past were not
worth pursuing because of cost, but at $3 to $4 gasoline, they are
now competive.

So the sky isn't really falling.  Driving cars will not cause us all to
starve to death.

Hans. (still eating well and driving all that I want)