NEW YORK, NY -- (Marketwire) -- 09/21/11 -- The ethanol industry continues to face scrutiny from the media. The favorable US governmental policies that promote corn being used by US-based ethanol plants have sent corn demand surging, leading many analysts to argue that ethanol is -- at least partially -- responsible for the higher corn prices in recent years. The Bedford Report examines the outlook for companies in the Ethanol Industry and provides investment research on Pacific Ethanol Corporation (NASDAQ: PEIX) and Archer Daniels Midland Company (NYSE: ADM). Access to the full company reports can be found at:
Last week a hearing of the House Subcommittee on Livestock, Dairy, and Poultry focused on the limited feed availability and resulting higher feed costs. The panel accused the ethanol industry as a key cause of livestock/poultry producers' dipping profits and a coming rise in consumer prices. Steven Meyer, President of Paragon Economics, an Iowa-based livestock and grain market analyst, argues, 'subsidized ethanol has meant record high corn prices, record-high costs of production for meat and poultry, resulting lower per capita meat and poultry output and, finally, record-high meat prices. The U.S. pork industry lost $6 billion in equity from 2007 through 2009, but improved profitability did not stop the exodus of pork producers in 2010.'
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New EPA regulations set forth this year have likely solidified ethanol's future in gasoline. The EPA approved the use of up to 15 percent ethanol in gasoline in vehicles produced during 2001-2006. The EPA had already approved the 15 percent ethanol tolerance for vehicles made in 2007 or later.
Archer Daniels Midland said net income for the most recent quarter was $381.0 million, or 58 cents per share, compared with $446.0 million, or 69 cents per share, in the year-ago quarter. Archer Daniels explained that profit from making ethanol was up sharply, but that was offset by escalating costs in other businesses, including sweeteners and starches that also rely on corn.
Pacific Ethanol reported revenue of $215 million, up from $77 million in the second quarter last year. Total gallons sold were 100.6 million for the second quarter of 2011, an increase of 54% over the 65.4 million gallons sold in the second quarter of 2010.
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