Thursday, February 19, 2009

The Myth of Peak Oil

It's sometimes hard to look at all the nonsense being perpetuated by people with agendas, as it seems there's almost nothing important any more that isn't politicized in some way, and so ultimately lied about. Gold is one of those things, and another major one, which I want to talk about is peak oil.

So by definition, what is peak oil? It simply means that oil that was relatively easy to reach and extract has been depleted. The question then becomes if that is in reality the case. The answer is absolutely no. The peak oil myth is just that - a myth. That doesn't mean there won't come a day when that becomes the reality, it's just that it isn't the case now, and won't be any time soon.

So why is the myth continually perpetuated? Because it takes the eyes and minds of people off of why oil prices sometimes surge and the caused behind it. The major reason there's the beginnings of an artifially induced oil peak is because of consequences of political actions put into law which forbids access and drilling on easy-to-drill and extract oil. Think of Alaska and off the coastlines of the U.S. There are billions of barrels of oil available, yet not allowed to be drilled for because of pressure from radical environmentalists and lawmakers looking to curry favor from the media which loves this type of idiocy.

This is mostly brought about from the endless introduction of fear as the key tool used by these liars in order to manipulate public policy to their hidden agendas.

These manipulators even try to ask the types of irrelevant questions that herd people a certain way so, again, they don't look at the facts, realities and agendas behind them. For example, they use terms like what is going to happen "after oil." Or other statements like "surviving peak oil," or "life after peak oil. The implication is that peak oil is reality that we must now deal with, rather than the fact that there's absolutely no basis for concern at this time if the current regulations were removed. That's what is trying to be hidden from the minds of people.

Besides the obvious billions of barrels of oil in Alaska and off American coastlines, where else is there oil available? In the United States itself there is enough oil in shale to make it the largest oil reserves in the world; far beyond what Saudi Arabia has. That is a proven fact. There are of course also have billions of barrels of oil in the Canadian sands area, which will also last for decades. These are just a couple of areas which don't include many other areas in the world.

So why imply an oil shortage, what is the hidden agenda behind it. Some of it is philosophical, as ignorant people literally think of the earth as their mother, and to drill into their mother is actually hideous in their warped minds. Another reason for asserting oil depletion is in order to promote agendas related to radical environmentalists and their business allies, who want to try to cash in on the misguided focus on what is called "alternative energy," where billions of dollars are being wasted because of the fear mongering people who make it look like the world is falling in order to gain access to public and private money to further their purposes. It's nothing more than that.

There's no oil crisis, we're not close to losing easy access to oil supplies.

While I do agree that oil prices will eventually have to go up, especially until ways of figuring out how to extract oil from shale is made cheaper, there is still so much oil available that to say we're in any type of crisis is dishonest at best, and ignorant at worst.

Even new ways of scouring the ocean floors and seeing what lies beneath the salty residue has resulted in billions of barrels of oil being discovered by Brazil, and their just getting going on that, as Petrobras continues to look for more deposits. Granted, it's far below the ocean floor and will be more costly - at this time - to extract, is does show how much oil there is that hasn't been discovered yet, and how much would be avaiable when restrictions on drilling for oil on coastlines are lifted.

The world oil supply is fine, and world oil reserves in a solid place. Oil consumption for now has cut back, as economic weakness causes consumers to drive less and stay around home more. That will extend signficantly the amount of oil available and its use.

So you don't have to worry or be fearful over the dishonest assertions by those with private agendas. There's billions and billions of barrels of oil available, it's just not being allowed to be drilled for because of existing laws which eventually will be withdrawn when real pressures from the population make it politically dangerous to keep people from cheaper oil and gas prices.

Wednesday, February 18, 2009

Stem Rust UG99 Savaging Kenya Wheat and is Spreading

Stem rust has returned with a vengeance 50 years after it was thought to eradicated, and now called UG99, it is decimating wheat in Kenya and going viral by spreading to other countries surrounding Africa.

The diseases came back in 1999, and skipped across the Red Sea to Yemen in 2006 and was discovered in Iran last year. Crop scientists say there is no defense at this time to stop its spread and are growing frustrated in their work on developing resistant strains. In about a year it can grow to huge levels under particular weather conditions.

After last year's food shortage caused partly from corn being diverted to ethanol and acreage used to grow other grains got taken up by corn, it resulted in food riots last year, the growing epidemic shows the vulnerability of the food supply in poorer countries.

Scientists were shocked in 1999 when it was discovered that wheat bred to resist stem rust fell to the fungus. That was the first sign something was wrong.

Researchers in South Africa and Minnesota recently found out why it was true. In the biological churning that constantly endows old pests with new genetic combinations, stem rust had acquired a scary power to break through the resistance that had guarded wheat for decades.

Close to eighty percent of Asian and African wheat varieties are now susceptible to the disease, and so is barley. Scientists dubbed the new threat Ug99 for its discovery in Uganda in 1999. But they say more than likely started in Kenya, where a lot more wheat is grown.

Almost a year ago the FAO confirmed that the fungus had spread to Iran and reported that "Afghanistan, India, Pakistan, Turkmenistan, Uzbekistan and Kazakhstan, all major wheat producers, are most threatened by the fungus and should be on high alert."

Contrary to regular rust infestations, which reduce but do not completely destroy yields, stem rust can eradicate a whole field.

Throughout the developing world, hundreds of millions of small-scale farmers are the most vulnerable.

Wheat experts from around the world have mobilized to fight the rust. Headquarters for the effort is the Kenya Agricultural Research Institute's station near the village of Njoro.

Norman Borlaug, who is credited with breeding the rust-resistant wheat that saved millions from hunger decades ago, was taken in 2005 by the Kenyans to look at the new stem rust damage and challenge.

Because the last stem rust outbreak was about 50 years ago, not many know the damage it could cause and so Borlaug recruited scientists from other wheat-producing countries and raised funds to underwrite their work. Foundations in the United States and Japan also got involved, as did the governments of Canada, India and the United States.

Researchers have been working stedfastly to find new resistant plants to UG99, but after numerous trials, plants have been losing the battle, as farmers around the world fear the right conditions will devastate their crops.

Most of the trials in the U.S. are being conducted in labs in Minnesota and Winnepeg, Canada in order to reduce effects if the virus escapes the labs somehow, as the brutally cold weather offers another layer of protecion if something goest wrong.

While there's a lot fo concern, at least scientists are working in ways that aren't going to cut corners, and are methodically taking the steps needed to fight the UG99 that will last.

Sunday, February 15, 2009

Gold ETFs Acquiring Record Tons of Gold

SPDR Gold Trust GLD.PGLD.A, also known as GLD, asserts the gold bullion it owns has risen by over 100 tons to 970.57 tons recently, which marked the largest weekly increase in the history of the gold-backed exchange-traded fund.

SPDR Gold Trust, the world's largest gold-backed ETF, said its holdings rose nearly 5percent on to record levels. Gold prices surged, implying significant buying.

Investors who are expecting years of inflation and worldwide economic volatility are pouring money into securities backed by gold bullion, helping turn what has been a safe haven into a mainstream asset class.

GLD is now the second biggest U.S. ETF, with market value of $27.5 billion, which ranks it behind only the popular SPDR S&P 500. GLD owns at this time more gold bullion than the entire government of Japan, according to the World Gold Council.

Another big gold ETF player, COMEX Gold Trust IAU.P, said its holdings also rose to a record high 70 tons.

Gold ETFs are listed on stock exchanges and offer investors exposure in bullion without having to take physical delivery. Sponsors of the funds buy a matching amount of physical gold and keep it in bank vaults.

The extraordinary rally in bullion originates from the inflationary expectation arising from the U.S. government's misguided borrowing of over $2 trillion to finance a bank rescue plan and to enact a pathetic package to stimulate the world's biggest economy in efforts to reverse a global slowdown.

While there was recent talk about a shortage of physical gold bullion as more investors turned to gold as a safe haven, that doesn't seem to be the case, as some say there are not any problems at all for gold ETF authorized dealers to acquire gold bars to create new shares.

The existing low yield of currencies and U.S. Treasury bonds because of stimulus plans by central banks made gold - which produces no interest - more attractive to investors.

Monday, February 9, 2009

Oil Investment | 2009 and Beyond

The oil and gas industry continues to struggle as overall demand continues to decline. That has of course, as far as oil demand goes, created the current contango or super contango situation which has resulted in a great chance to make safe money through oil investment.

Even though oil and gas companies will have some short term difficulty and challenges, as the economic circumstances continue to gradually improve, people will start driving, flying and traveling again, and we'll see oil demand and oil prices start to increase again.

Oil news has been somewhat grim, but again, crude oil isn't going to drop in need or use anytime soon, and even though mainstream media outlets love to make big oil companies look like villains, they will continue to be profitable far into the future because of the demand for it will not stop any time soon.

Many people that in reality oppose the use of oil for a variety of stupid reasons, like to try to make the argument that we've reached the point where oil has peaked, or peak oil, so that we much waste billions of dollars in order to save humanity as fuel resources dry up. This is nothing else but a lie, and the use of fear as a tool to take taxpayers dollars and waste them on things like ethanol, which has turned into a disastrous debacle and the source of an endless number of engine breakdowns, especially among small engines. Creating an atmosphere of torment and fear has ended with idiotic waste of time and money, when in reality there are billions of barrels of oil on U.S. land and off it's shorelines. Only the hateful environmentalists and their private agendas generate the type of publicity that makes this typeo of scenario possible, as the thought of drilling into their mother earth is atrocious to these earth worshippers, as they are offended by humans existing, but god help you if you drill into their "mother."

That's my little rant. Now the reality. Just in the rock shale of the United States alone, it is estimated there is far more available proven oil reserves than exists in Saudi Arabia. This is trying to be covered up so Americans don't call the government and radical environmentalists to account for their crimes against humanity by not only lying, but covering up the fact that there is that much oil available for use. This doesn't even take into account the oil off our shorelines or in Alaska. Go beyond that and we have the new methods that can see hidden oil underneath the salt of the oceans, and where Brazil's Petrobras has uncovered billions more in oil fields beneath the ocean floor, and they're just getting started. Add the huge amount in the Canadian oil sands and you get the idea. The idea of peak oil is a joke at this time, and will be for many decades into the future. Those opposing oil and gas companies have been hiding the fact of how much oil is available so they can create a panic in order to get access for their pet projects in relationship to alternative energy. A growing number of those in the energy business are doing the same as tax credits and other incentives "blind" their eyes to the huge source of existing energy we still have.

So the oil and gas industry along with the oil and gas companies are in reality in a strong position in the long term, as oil and gas will flow through the pipelines for decades and decades into the future, which will not only provide many oil and gas jobs, but keep things running while we lose the emotional baggage and slowly look at realistic and legitimate sources of alternative energy going forward. There's absolutely no lack of oil and gas we can drill for and produce at this time, and there is no need to create the false sense of urgency the media has been doing through its going to bed with environmentalists.

Oil exploration needs to continually be encouraged, as well as removing barriers to oil well drilling. Oil development will continue to be a huge business in the world, and the resources out there are still staggering, as far as the amount of oil and gas still out there to be extracted from the earth and underneath the oceans.

Where does all of this leave oil and gas as an investment? It will be a very strong and profitable place to put our money, both over the short and long term.

Once the global recession starts to wind down, demand for oil will increase and go beyond normal levels, and we'll see a huge increase in use and prices. Those investing in the oil industry and oil companies will profit tremendously, as it's discovered that oil resources aren't diminishing at all, but are available in huge quantities. As oil engineers solve some of the cost problems related to extracting oil of shale, along with doing it more efficiently, we'll see this story unfold in the years ahead, as the media, politicians and radical environmentals won't be able to hide it.

Short term we already have the existing contango or super contango condition that allows a safe and guaranteed source of profit via taking arbitrage positions, and as that winds down, we should see oil prices start to gradually rise again. It's only a matter of when the economy turns around; that's what we need to be looking at and measuring our decisions of when to invest in oil by.

So whether it's oil drilling companies, natural gas companies, or oil and gas companies within the oil and gas industry, the future is bright for all aspects of the energy sector. Those investing in oil or gas in the short and long term will find themselves very happy with the profits they take away from it.

Saturday, February 7, 2009

Silver: Prices Going Up in 2009?

While in my opinion there is no doubt 2009 will be a great year for silver, and prices will go up for silver futures, coin and bullion, as well as many silver mining company stocks.

A major reason there's been so much confusion surround the behavior of gold and silver recently, is because the unusal situation of forced liquidation has kept them down in price while the U.S. dollar has remained strong, even though underlying fundamentals said it shouldn't have.

Because of this, companies were forced to sell their positions in gold and silver and other commodities in order to raise much needed cash, this kept things where they have been for silver and silver futures until recently. It seems companies' positions have largely unwound now, and silver and gold are starting to be the investment of choice for those interested in both safety and getting a return. This will be true for silver, whether it's silver dollars, silver futures, silver bullion, or any type of silver coin, and most well run silver companies. Silver prices in the near future should do very well for silver investors, and whether you take physical possession of silver or buy silver company stocks or silver futures, they should perform strongly in 2009, as prices of silver go up.

This is one of the questions I've been asked about a lot lately, on whether silver prices are going up or will rise in 2009. The answer is almost assuredly yes! And considering the price of silver in contrast to gold is so large, the percentage of silver should outshine gold and probably perform even better in that regard. The one thing to keep in mind is if safety or a haven for your money is more important, gold will be the obvious choice, and it should give a solid return for the 2009 economic circumstances. Silver will do well to, but it could be more volatile than gold, but also has a better chance of making you more money. It's the old risk versus reward this year in silver and gold investing.

We shouldn't be afraid of those worried over the overall commdodity sector, and those making it look like everything connected to raw materials will fall this year. That's going to be absolutely false. I think they're asserting that so you don't pull your money out of their investments and put it into commodities, where is several cases prices should do quite well this year. Obviously we must do our homework in our commodity investing, as a number of raw materials will definitely fall in price, and so will be risky. All we have to do there is understand what sector we're investing in, and what sectors are weak as far as demand for raw materials go.

Back to silver, investing in silver will be profitable this year, and silver prices will rise in general across the board. Silver futures prices will rise along with other commodity futueres, and in some cases phyiscal silver in the form of bars and bullion should rise right along with silver futures. Investing in the stock of silver mining and silver companies, as in all cases, must be handled differently, and things like management and operations is as important as anything else. Silver prices will enable companies to expand, the question is whether it'll be done responsibly or not.

So in answer to the questin of whether prices of silver will go up this year, it is absolutely yes. I think investing in silver futures and physical silver, as far as bars and bullion will be a surety for profit, when you get into silver coins and numismatic value, obviously there are many more factors involved in silver coin prices.

Friday, February 6, 2009

Ethanol Producer VeraSun Energy Finds Sucker

There's always a sucker to find to sell a worthless, and less than worthless piece of business property to, and VeraSun Energy Corp. surprisingly has done just that in clueless Valero Energy Corp., which will pay VeraSun Energy $280 million for the privilege of taking fiver VeraSun plants off their hands.

Boy am I glad I don't own shares in Valero Energy, as this will pull them down in a big way, as the hapless ethanol prodcution industry collapses around it. I would have thought VeraSun would have paid that much just to get rid of them.

Now that the company has received and agreed to a deal, per terms of their bankruptcy, tehy now must hold an auction to give other companies a chance to make rival bids. Anyone else dumb enough to do this out there?

If perchance any other qualifying bids are offered, an auction will be held on March 16 to battle over the VeraSun corpse. Bidders have until March 13 to submit qualifying bids.

VeraSun is attempting to sell all 16 of their existing of its ethanol plants.

Along with the acquisition price of $280 million, the deal would be plus value of inventory and certain pre-paid expenses, for production facilities in Aurora, South Dakota; Charles City, Fort Dodge, and Hartley, Iowa; and Welcome, Minnesota; and a site under development in Reynolds, Indiana.

Under terms of their Chapter 11 bankruptcy, the court also gave Verasun permission to sell seven of the eight ethanol plants they acquired from U.S. BioEnergy last year (smart company to get out at the right time), although none of those are included in the Valero energy deal.

VeraSun CEO Don Endres said that taking into consideration the terrible conditions of the ethanol industry and supposedly difficulty in getting credit (who would give it to them in the best of conditions), this seems to be the best avenue to take.

The truth is the ethanol industry is a disaster and shouldn't be part of the alternative fuel scene in any form. VeraSun is the best example of that, as they would be completely destroyed if someone didn't come buy and pick up the shattered pieces.

I don't know what Valero Energy executives are thinking, but this makes no sense. If I was a shareholder I would be screaming bloody murder and lining up lawyers. This is an outrage that will push Valero Energy's value down for years to come. There just isn't any upside for this at all.

VeraSun should have simply been allowed to fold up and fail. But this is being pushed behind the scenes by government officials who know the truth would come out more into the light about the misguided fuel mandate involving ethanol as a biofuel. Opposition is growing as they attempt to salvage one of the more unpopular government hand outs ever.

All the operations and production facilities are being attempted to be sold by VeraSun so they don't make the government fiasco look so bad. I'm really surprised anyone with an ounce of brains would have taken on this huge debt and was willing to throw money down a bottomless rabbit hole.

Managing the sales process and acting as a financial adviser for VeraSun is Rothschild Inc, while advising Valera is Credit Suisse.

Someone is finally doing something right for VeraSun, too bad it wasn't before they entered into the ethanol industry at all, and were decimated and humiliated as they couldn't even make money with a taxpayer subsidized industry. I can see Valero Energy getting into shareholder trouble in the future as the weight of adding this to their bottom line pummels shareholder value in the company.

Corn Futures in India Drop

Few buyers show up to by in the Indian corn spot market, driving corn futures in India down.

India corn futures ended lower on Friday on sudden absence of buying by local feedmakers and exporters in the spot market, analysts said.

"Both domestic feedmakers and export enquiries were not seen in the market today," said Rahimtullah, a trader in Nizamabad, a major trading hub.

Prices fell by 4 rupees to 820 rupees per 100 kg in Nizamabad spot market.

Prices showed some positive trend in the past one month as demand from local poultry feed-makers started to pick up recently after being tamped down in recent months by a bird flu outbreak.

Government agencies, another major group of buyers in the past one month, almost stopped buying in the last 3-4 days, a trader said.

February futures NMZG9 on the National Commodity and Derivatives Exchange ended at 848 rupees per 100 kg, down 1.39 percent.

India corn futures should rise going forward though, as government agencies and other big players come back to the table.

Ethanol | Worse than Gasoline

... says a study from the University of Minnesota on corn-based ethanol

Ethanol continues to get hammered as another study, this time from the University of Minnesota, says the costs are much higher than originally anticipated, and is higher than gasoline when taking into account all factors.

Health, environmental factors make conventional ethanol costly, but the market for alternative fuels is tanking

As noted in The New York Times yesterday, researchers from the University of Minnesota compared the cost of corn-based ethanol to the cost of gasoline and found that ethanol costs more when environmental and health factors are included.

The process of making ethanol is energy-intensive, and the most expensive ethanol is made with corn in facilities that burn cheap but polluting coal.

According to the study, “Climate change and health costs of air emissions from biofuels and gasoline,” the numbers are grim.

“For each billion ethanol-equivalent gallons of fuel produced and combusted in the U.S., the combined climate-change and health costs are $469 million for gasoline, $472–952 million for corn ethanol … but only $123–208 million for cellulosic ethanol [ethanol derived from prairie biomass, corn stalks, switchgrass or other sources],” the study says.

The huge range of cost for corn ethanol is due to the different methods used to produce the fuel. The $952 million number is for ethanol made using coal, a method that’s being used in an increasing number of ethanol facilities.

As Grist noted back in 2006, “More and more ethanol manufacturers are looking to power their plants with cheap coal instead of its cleaner and increasingly expensive competitor, natural gas, thereby potentially limiting ethanol’s environmental benefits.”

The University of Minnesota study includes charts and maps, including one that shows a big, dark red blotch — next to New Mexico — that indicates where corn ethanol is made with coal.

Without those handy state border lines it’s a little hard to tell what’s what in those pictures above. But here’s another map that puts it in better perspective:

The map is a little old; there are now three plants in operation in Texas and seven more planned.

That green dot in New Mexico is the Abengoa Bioenergy plant in Portales. Built in 1985, it was producing 30 million gallons of ethanol before a temporary shutdown in October due to fluctuations in both the grain and oil markets.

Most of the city of Portales gets its power from Xcel Energy, which sells power generated New Mexico and Texas, including two coal fired power plants in West Texas. About half of Xcel’s power — 52 percent — comes from coal; 41 percent comes from natural gas and 7 percent comes from wind and other renewables.

“The coal plants run about 24-7 because its the least expensive and the most efficient,” says Wes Reeves of Xcel.

More than 70 percent of New Mexico’s power is generated at two coal-fired plants near Farmington (pdf). Carbon dioxide emissions from coal make up more than half of the emissions from power plants in New Mexico.

Because producing ethanol is so energy intensive, many ethanol plants don’t buy electricity; they either buy natural gas or they have their own power plants, which burn coal or other fuel, such as cow poop.

When the Abengoa plant is running, it uses the cleaner, but more expensive, natural gas. Abengoa, which is headquartered in Spain, does not have any coal-fired ethanol plants, says Vice President Christopher Stanley.

The Portales ethanol plant had to close temporarily because the high price of grain sorghum and milo — the raw ingredients it uses to make ethanol — is relatively high, while the price of gasoline, which largely determines the price of ethanol, is low.

“It’s all market-driven,” Stanley says. “It’s our intention to resume production as soon as the market improves.”

And the market is not good. As the Times noted earlier this week, the crummy economy and the credit crisis have put a serious dent in the market for alternative energy. Companies that make wind turbines and solar panels have all laid off workers; biomass and geothermal groups have also seen a slowdown. Meanwhile, the falling price of oil has put a kink in alternative fuels’ chain.

One ethanol plant in Hereford, Texas, which broke ground in 2005, planned to use manure from nearby dairy farms rather than natural gas or coal for power. But less than two weeks ago, the company, Hereford Biofuels, filed for bankruptcy and announced it was putting the still-unfinished plant up for sale.

Algae-derived biodiesel is attractive in part because conventional biodiesel is made from soybeans, and like corn-based ethanol, is subject to the “food or fuel” debate. And demand for biodiesel is increasing; in 2007, the New Mexcio Legislature passed the Biodiesel Standards Act, which will require 5 percent biodiesel in state vehicles by 2010 and for all vehicles by 2012. The state is also offering tax credits to facilities that install blending equipment.

The Center of Excellence for Hazardous Materials Management, working in partnership with Los Alamos National Laboratory and New Mexico State University, has developed an algae biodiesel test project near Carlsbad.

“In Carlsbad we’re hoping to take microalgae to market. The project has the potential to make biodiesel that wouldn’t use a field crop but would take advantage of some wide open spaces and brine water,” says Fernando Martinez, director of the Energy Conservation and Management Division of the New Mexico Energy, Minerals and Natural Resources Department.

But is algae biodiesel economically viable? Last year, Doug Lynn, the center’s executive director, said he was cautiously optimistic that biodiesel could be produced from algae for $80 per barrel. That’s a lot better than last year’s $150 per barrel prices for oil, but not compared to the $40 we’re paying right now.

In the aftermath of yet another study critical of corn-based ethanol, ethanol backers are expressing frustration with what they consider faulty research.

Dr. Martha Schlicher is the former head of the National Corn to Ethanol Research Center and now vice president of Illinois River Energy. She says the recent University of Minnesota study, like others in the past, fails to recognize dramatic technology improvements occurring in corn ethanol production.

“Science grows and develops and gets perfected with time,” Schlicher says. “We have a willingness to accept that in the medical field—I think brain surgery and heart surgery have probably improved dramatically. Antibiotics have improved dramatically.”

In the Minnesota study, for example, Sclicher says researchers failed to mention that natural gas and electricity could eventually be eliminated from the ethanol production process, which would greatly alter its emission profile.

While negative to corn ethanol, the Minnesota study was very positive to cellulosic ethanol. However, Schlicher thinks it “over-promises” on the potential of cellulosics.

“If we think for a minute that cellulosic-based ethanol, or an advanced biofuel, is going to be perfect when it gets to market, we’ve got another think coming,” Schlicher says, “and then we’re right back to the same old starting point and we’ll never have an alternative to gasoline.”

Schlicher says cellulosic ethanol is an important part of our renewable future. But while it is being developed, she says America should optimize the base of production that it has today in corn ethanol.

Even with these continuous misguided and dishonest calls for ethanol as a biofuel, and even looking to the more expensive cellulosic ethanol as a future alternative to corn-based ethanol, it looks like its backers are looking at it as a form of environmental religion, as they continue to ignore the disaster that ethanol in whatever form it takes is.

Wheat | China Drought Threatens Crop

The wheat drought in China could end up being more of a worry than a reality as the country rolls out heavy irrigation efforts to save the wheat crop.

China's main wheat crop may yet emerge mostly unscathed from a dire drought as Beijing moves to fund last-minute irrigation, reviving crops that might otherwise have been left to die by farmers struggling with low prices and oversupply.

A domestic media outcry and public hand-wringing about the severity of the drought triggered some speculation that the world's biggest wheat producer might resort to imports, but experts say fears over the impact of the drought -- which officials have called the worst in half a century -- are misplaced and overblown.

On Thursday Beijing declared an emergency over the drought in parts of northern China that lie between Beijing and the Yangtze river, which have seen little snow or rain since November. Among the areas hardest hit is China's biggest wheat producing province, Henan, which grows a quarter of the crop.

The drought area covers almost half of China's winter wheat fields, but only a fraction have suffered real damage so far. Much potential damage could be prevented if farmers irrigate their fields in time, researchers said. The Agriculture Ministry said on Thursday half the affected fields had been irrigated.

"If all the measures are implemented, we will be able to keep losses to within 2.5 percent" of the total harvest, said Xiao Ziniu, an official at China Meteorological Administration.

A forecast for rain across much of the area this weekend should help, although too little is expected to end the drought.

Even so, President Hu Jintao has ordered "all-out efforts to combat the severe drought" and the government has mobilised millions of farmers to water their dry fields by offering subsidies and sending experts to help drought relief, which should minimise the impact on seedlings.

That could keep losses to less than 3 million tonnes, pulling overall production back from last year's record 112.5 million tonnes towards 2007 levels. That might prompt some sales from China's swollen granaries, but would be unlikely to spill over into calls for large imports from the international market.

While farmers are not yet in the clear -- the damage could get worse if crops are starved of water during their critical growing phase in March and April -- China also has a sizeable supply cushion should the damage spread.

Last year China exported only 126,000 tonnes before the government suspended exports, concerned about a spike in global prices that could have drained its stocks. To prevent a glut and pressure on farm incomes, the state bought up 43 million tonnes of wheat, adding extra reserves to existing stockpiles.

"Even in the worst-case scenario, the government, with 60 million tonnes of wheat stocks, has the ability to ensure supplies and control prices," said Ma Wenfeng, an analyst with Beijing Orient Agribusiness Consult Ltd.

Even so, the drought has stoked anxiety among analysts and traders over short-term supply, combined with a drought in Argentina, Indian export controls and Pakistan imports.

"In the current environment, with a lot of nervous investors who think commodities will rally later in the year, they're waiting for a good story for that to happen. News can really turn a market," said Brady Sidwell, an analyst at Rabobank.

Chinese wheat futures <0#CWS:> are up 5 percent since the market re-opened on Monday after a holiday week, but physical prices <0#ASWHEAT-CN> have remained stable at the price set by the government for its own purchases.

On the Chicago Board of Trade, front month wheat futures Wc1 jumped 3.6 percent on Thursday, although they are still down since the start of the month, as reports of the worsening crop began to circulate.

China is the world's top consumer and producer of wheat, and almost 95 percent comes from China's winter harvest.

For a graphic on world wheat producers click: here


Even though the wheat crop is likely to fall this year, the impact on farmers' incomes may be slight, or even positive.

Wang Shaozhong, a wheat researcher in Henan Academy of Agricultural Sciences, told Reuters that after five years of bumper harvests and a trend of migration from the countryside to the cities, many farmers had not irrigated their winter wheat because the cost was too high and the profit margin was too low.

"Grain prices are not attractive enough for them to expend too much effort watering the fields," said Wang.

Wang's colleagues at the Henan Academy of Agricultural Sciences have been dispatched to villages to ensure that wherever farmers have access to water, they irrigate their crops.

"We ask them to water all the wheat fields within 10 days. In some areas, local governments pay subsidies to farmers who irrigate fields," said another researcher with the Henan academy.

Watering dry crops means extra labour and fuel costs and those far from rivers would have to dig wells to get water.

In some areas it would cost 70-80 yuan ($11.70) to irrigate one mu, a Chinese land unit equivalent to one fifteenth of a hectare. That means farmers need to spend $2 to protect $1 worth of crops against potential damage from drought.

"If you water the fields, you may get 50 jin (25 kg) more wheat per mu, but with wheat prices at 0.8 yuan per jin, what does it matter as long as farmers can ensure they have enough to eat?

And after five good years, most farmers have grains in store and are not worried about food, he said.

"Or maybe the drought is good news for farmers because potentially tight grain supply would help push up grain prices. Cheap grain prices are hurting farmers."

At China's weekly wheat auctions on Wednesday, no bidders were interested in 914,212 tonnes of old stocks of imported wheat offered by the government. The government plans to auction a total of 1.73 million tonnes next week.

China's government is always wary of tensions in the countryside that could spark unrest, especially as the economic slowdown adds to the number of unemployed. But behind its rhetoric, the government has allocated a mere 400 million yuan ($60 million) to deal with the drought.

Much more help is likely to come from a state economic stimulus plan which, at 4 trillion yuan, is 10,000 times bigger and includes funds to upgrade agricultural infrastructure such as irrigation systems.

The wheat crop looks like it'll have a good chance to survive the drought in China as the irrigation efforts are starting to pay off.

Oil | Contango Continues Supertanker Storage

The super contango arbitrage remains in play for investors as oil continues to be stored on supertankers in anticipation of prices rising.

Oil companies are still building up vast floating reserves of unsold crude oil on supertankers at sea because oil for immediate delivery is much cheaper than futures prices, traders and shipping brokers said on Friday.

The stockpile, mostly on Very Large Crude Carriers (VLCCs) in the North Sea, U.S. Gulf, in the Mediterranean and off the coast of West Africa, is now so large that it probably exceeds 80 million barrels -- about equivalent to a day's global oil consumption, brokers say.

Despite the recent sale of a handful of cargoes of North Sea crude from a supertanker at Scapa Flow in Scotland's Orkney Islands last week, the economics still make a compelling argument for buying oil now, putting it in a ship and selling it in a few months' time, traders say.

Much of the oil is North Sea crude such as Forties and Brent, but it also includes Russian Urals crude, West African and other grades.

Margins can be locked in at the time of purchase through a series of time spreads or contracts for differences as well as trades on London's ICE futures market.

"The amount of oil stored at sea is increasing steadily and will keep increasing until the numbers no longer make sense," said Simon Wardell, oil analyst at Global Insight in London.

Deepening global recession has dragged oil prices down more than 70 percent since they hit a record high of almost $150 a barrel last July, but oil futures prices are much higher, more than paying for storage and other costs such as financing.


This discount for North Sea oil now below oil for the future, known as a contango, has been as wide as $8 over the last two months and much of the oil now stored at sea was put afloat in December.

Last week, the trading arm of Royal Dutch Shell (RDSa.L) sold three cargoes of North Sea Forties crude by transshipment, prompting talk that the storage trade might be coming to an end.

The contango had flattened out, allowing Shell and some other companies that had stored oil to cash in and make a profit.

But the discount for prompt oil has deepened again over the last week, partly perhaps because of the release of some of oil from storage, and traders have again started booking vessels on long-term contracts with storage options, shipping brokers say.

BP Plc (BP.L), U.S. oil company Koch and independent Swiss-based trader Gunvor have all been in the market for, or taken options on, VLCCs with flexible, long-term storage options in the last few days, brokers say.

"There is no doubt that the contango play works again," said one oil broker, who declined to be identified. "The margin is there and is being filled."

By early Friday, there was a spread between light, sweet physical North Sea crude for delivery next week and June Brent futures LCOc1 of around $6.75, and closer to $8 against July futures.

Assuming rental rates for a 2.4 million-barrel VLCC of around $60,000 per day, that would put the cost of oil storage at around 75 cents per barrel per month, well inside the time spread even with hefty financing costs.

Many traders now storing oil believe the market for prompt oil will begin to strengthen over the next month or so as promised cuts in production by members of the Organization of the Petroleum Exporting Countries begin to tighten supply.

The onset of the northern hemisphere summer could also spur an increase in demand for gasoline in the United States.

But analysts suggest the sheer size of the floating stockpile represents a threat to any quick recovery in oil prices. The oil will be released on to the market as prices recover, helping to slow or at least dampen any recovery.

"At some point all this oil will come flooding back into the market once the prompt price comes up against the futures," said Wardell. "That is likely to depress prices again."

The super contango arbitrage play is one of the few sureties for investors, and well worth investing in to assure profits.

Oil | Forty Dollars the Low for oil?

Now that oil futures prices have traded above the $40 mark for a couple weeks, some are concluding that the bottom may have finally been reached for the black gold.
After hitting a four-year low of $32.40 a barrel on Dec. 19, oil has now rebounded more than 20%. While occasionally falling below $40 in intraday trading, it has closed above $40 everyday since Jan. 20. Similarly, national average gasoline prices have risen above $1.90 a gallon from below $1.70 a month ago.
"While crude-oil markets may remain vulnerable to further disappointments in [...] economic conditions, there is also the potential for a price base to be forming," wrote Brenda Sullivan, an analyst at Sucden Financial Research, in a note.
Ultimately, analysts say the future direction of oil prices will depend on the outcome of the struggle of two opposing forces.
On the one hand, the weakening global economy is expected to lead demand for oil to fall for a second year, marking the first two-straight-year decline in decades. On the other hand, the Organization of Petroleum Exporting Countries is expected to continue cutting production at a record pace to put a floor under prices.
High stakes
The stakes are high for investors who are bullish on oil, especially those who've poured record amounts into oil exchange-traded funds.
Data showed investment in oil ETFs, a convenient investment channel for retail investors, has reached record levels. The number of crude futures contracts held by the United States Oil Fund (USO) , the largest oil ETF, hit a record high near 80,000 recently. One contract represents 1,000 barrels of oil.
Last year, the commodity proved one of the best ways to earn a lot of money - and then, to lose it all. After hitting a record high of $147 a barrel in July, oil fell more than $100, or 70% by year-end. It closed 2008 down 54%, its biggest loss ever and more than the stock market's tumble.
Trading in the first months of this year also didn't bode well for oil bulls. Crude has lost 10% so far this year, compared with a 5% loss in the Reuters/Jefferies CRB commodities index, and a 4% gain in gold prices.
On Friday, oil fell 2% to near $40 a barrel on the New York Mercantile Exchange after the U.S. reported a 16-year high unemployment rate. See Futures Movers.
Some analysts predict oil prices could fall to as low as $25 in the second quarter. The inflation-adjusted record low for Nymex oil is at $18.90 a barrel, hit on April 1, 1986. In non-adjusted dollar terms, that low was $9.75, the only time in Nymex history that oil fell below $10.
OPEC cuts production
Investors aren't the only ones wanted oil prices to stabilize. The 12 OPEC member countries, whose revenues heavily depend on oil prices, have made record cuts in their production.
Some of the members of OPEC said they want to see oil prices rise to at least $60 a barrel.
At its December meeting, OPEC agreed to reduce production by a record amount of 2.2 million barrels a day, starting from Jan. 1, adding to previous cuts of 2 million barrels. Overall, the reduction is equal to about 5% of the world's oil demand, which should easily offset any drop in demand, analysts believe.
Most energy agencies, including the U.S. Energy Information Administration and the International Energy Agency, predict world oil demand will fall by 1% to 2% this year, following a similar decline in 2008.
Chakib Khelil, Algeria's energy minister, said Tuesday there was a 50% chance of another supply cut during OPEC's next meeting on March 15, according to media reports.
But OPEC members, who control more than one third of the world's oil production, have a sketchy record of implementing production cuts.
Oil could rise if OPEC cuts production, said Phil Flynn, vice president at Alaron Trading. "But the problem is the compliance."

OPEC in January met only two-thirds of its pledge to lower oil output, as several members continued to pump above target levels, a Reuters survey showed on Tuesday.
While Saudi Arabia and the United Arab Emirates lowered their production below or close to their targets, some other countries, such as Venezuela and Iran, have pumped more oil than their allowed quotas, the survey found.
Economic rebound?
Investors are also hoping demand will rebound once the economy is revived. With governments worldwide adopting stimulus packages, some economists believe the economy could bottom out in the second half of the year.
The Federal Reserve said late January the economy was in worse shape than it was in December, but a "gradual recovery [...] will begin later this year."
And in its January monthly report, the Energy Department's EIA said that after two years' decline, world oil consumption is expected to record a modest rebound in 2010,.
Such forecasts have already encouraged oil investors to build up their positions, even before prices start rising.
"We are in a world of increasing demand and decreasing supply for tangible things, especially energy," said Steven Podnos, a financial advisor at Wealth Care LLC. "Oil represents an attractive investment sector."
But for now, the oil market is still plagued by weak demand and lofty inventories. The EIA reported Wednesday that crude inventories in the U.S., the world's biggest oil consumer, rose for a sixth straight week to 346.1 million barrels, the highest level in 18 months.
Meanwhile, inventories at Cushing, Okla., the delivery point for Nymex crude futures, have reached a new record high of 34.3 million barrels.
Global demand is poised to post the largest contraction this year since 1982, analysts at Morgan Stanley said in a recent report.
"Supply constraints will remain a longer-term issue and will be intensified by the current bout of weaker prices," the Morgan Stanley analysts said. But "the magnitude of demand weakness will leave this constraint a non-issue in 2009."
They expect oil prices to average $35 barrels in 2009 and fall to a low of $25 in the second quarter.
The EIA, meanwhile, said in its January report, it expects oil prices to average $43 per barrel in 2009 and $55 in 2010.

While oil prices should rise this year, it'll be interesting to see if we've really hit an oil futures low, or it takes more time to work out depending on consumer demand connected to the economic crisis.

Silver Falcon Mining, (SFMI) Expanding Milling Circuit

Silver Falcon Mining, Inc. (PINKSHEETS: SFMI) announces additional equipment to boost gold and silver production at its Melba, ID. mill.

The engineers of RMS-Ross, the suppliers of the equipment for the mill finished an on site inspection. The Company, under RMS' direction, began relocating certain pieces of equipment in the mill circuit for maximum output; also allowing for the installation of a parallel wet-line circuit. This additional circuit equipment and realignment of the current mill components should quadruple planned gold and silver production at the Company's Melba, ID. mill. The Company believes these changes should be completed within the next 2-3 weeks.

Mr. Pierre Quilliam, President of Silver Falcon Mining, Inc., said, "An increase in the demand for the gold/silver concentrates, motivated SFMI to undertake an expansion of planned output production at the Melba mill. This installation of the wet-line circuit should allow SFMI to quadruple precious metals output and, further advance, by at least two years, the underground mining developments on War Eagle Mountain."

Silver Falcon Mining, Inc., is an exploration and development Company specializing in high-grade Gold and Silver mining properties in North America.

Further Information contact Rich Kaiser, Investor Relations, YES INTERNATIONAL, 800-631-8127 and/or the Company at 941-761-7819,

Silver Falcon Mining, Inc. cautions that the statements made in this press release constitute forward-looking statements, and not guarantees of future performance and actual results or developments may differ materially from the projections in the forward-looking statements. Forward-looking statements are based on the estimates and opinions of management at the time the statements are made.

Gold Surging on Fear Says Barrick

According to Barrick Gold Corp. Chairman Peter Munk an “unpleasant and frightening” trend of investors buying gold as protection against uncertainty in world markets may help push the metal over $1,000 an ounce. It don't think there's any doubt gold will surge past $1,000 an ounce in 2009.

Munk, founder of Toronto-based Barrick, the world’s largest gold producer, said he has received an increasing number of calls from wealthy investors looking for ways to buy bullion. While that is positive for the metal market, it is a “sad part of a civilized society,” Munk said.

“That’s not where you want to be, it’s alarming,” he said today in an interview from Davos, Switzerland, where he is attending the World Economic Forum. “Do I personally believe gold will break through $1,000? It’s not a question of if, it’s a question of how soon.”

The strong demand is being mirrored among professional investors whose funds are buying gold and shares of the companies that produce it. That helped the metal to its eighth straight annual gain last year and has driven a rally in gold stocks in recent months. Gold miners including Newmont Mining Corp. and Yamana Gold Inc. are taking advantage of the trend to raise cash, with new equity worth more than $2 billion sold since November.

Barrick Gold rose C$3.16, or 7.2 percent, to C$47.14 at 4:26 p.m. in Toronto Stock Exchange trading. The shares climbed 7 percent last year, outperforming a 29 percent decline in the 16-company Philadelphia Gold & Silver Index.

‘Counterweight’ to Currencies

Gold is a “the obvious counterweight” to currencies, Munk said. The metal has reached record levels in Indian rupees and Russian rubles, among others, as investors outside the U.S. demonstrate a greater affinity to buy the metal as a hedge against currency declines, he said.

“Americans were brought up to believe in the dollar, with some justification, and it is the Germans and Russians and Indians that never trusted their currency,” Munk said. “Today, it’s a situation where people also have concerns about the dollar paper currency.”

Gold futures jumped to a record $1,033.90 an ounce in New York on March 17 as the dollar slid toward a record low against the euro and bank losses increased. Some investors buy the precious metal as a hedge against inflation and a haven from financial turmoil.

Greenlight Buying up Gold Mining Stocks

Greenlight Capital Inc., the $5.1 billion hedge fund based in New York, said earlier in the month it was buying gold and gold- mining stocks for the first time ever as a hedge against the Federal Reserve’s attempts to revive the U.S. economy by devaluing the dollar.

“Our guess is that if the chairman of the Fed is determined to debase the currency, he will succeed,” Greenlight said in a Jan. 20 letter to clients. “Our instinct is that gold will do well either way: deflation will lead to further steps to debase the currency, while inflation speaks for itself.”

Eight years of gains for the metal is the longest winning stretch of the 19 commodities tracked by the Reuters/Jefferies CRB Index.

Gold futures for April delivery rose $16.50, or 1.9 percent, to $906.50 an ounce today on the New York Mercantile Exchange.

As mentioned, it's a matter of if when gold rises above $1,000 an ounce this year as Barrick Gold Corp. Chairman Peter Munk asserts. The fall of the U.S. dollar will contribute to this as well.

Thursday, February 5, 2009

Ethonal: Ethanol Terrible Investment

Remember just a couple years ago when everyone was asking if ethanol was a risky investment? Well, we've got that answer in spades, as company after company falters and most companies with their primary focus on ethanol teetering on the brink of bankruptcy or already in it.

Even giant Archer Daniels Midland got clobbered with huge losses, even though they performed well in other areas to enjoy one of the few profitable quarters among that sector. That was in spite of their investment in ethanol and the ethanol industry, not because of it.

Anyone who has invested in ethanol stock is sorry they did it, along with ethanol companies created to benefit off the back of taxpayers funding. The flex fuel is a disaster, and whether someone worships at the altar of renewable fuels or not, they have to admit the future is not only grim, but impossible to successfully navigate if ethanol - whether it's corn based or cellulosic - is the source looked for in the renewable fuels sector.

Not only is ethanol have huge inputs that affect the environment, but as an alternative fuel is a disaster, with a number of studies showing it's going to cost far more per gallon than gasoline, than originally expected.

There really is no market for ethanol, and as far as small engine power equipment goes, it continues to damage them, even though those trying to force the ethanol industry on the rest of us aren't willing to admit it, even though manufacturers and small engine repair shops continue to say they're filled with snowmobiles, generators, chainsaws, and other small engine equipment using ethanol as part of their fuel.

When you also consider the mulit-millions used to build ethanol plants and artificially create ethanol producers, you see that taxpayer money could have been used for something much better than this misguided fiasco.

Add the current economic problems to the mix and it's even a great disaster. Ethanol plant construction is largely on hold; you can't send it through pipelines to get it cheaply to where it is needed; and in the name of the dubious idea of generating jobs build upon an illusion is worse than not doing it in the first place.

Producing ethanol as far as all costs concerned was vastly underrated, and the effect of using so much acreage to grow corn on the artificial prices that couldn't hold up, caused food prices to surge and riots around the world as people struggled to survive because of corn being used to feed the environmental nuts dream of nirvana rather than people.

So now most ethanol companies are a disaster; ethanol stocks have plummeted; ethanol as an investment is ridiculous; and it damages small engines and even some cars using e85 in their vehicles. And we're obsessed with ethenol why? Because people are trying to get the public eye off the billions of barrels of oil on American land and off its coastlines. They're pretending we've entered into a crisis period when in fact billions of barrels of oil are available for consumption.

No matter how the ethanol marketing campaign is arranged, you can't hide the horrid idea it has become, nor the huge, negative impact its having all around. Many original ethanol proponents have change their minds about its viability as a biofuel because of its challenges that aren't able to be solved.

Every aspect of it has failed, and yet because of the powerful farm lobby, which has nothing to do with small farmers but rather billion dollar companies getting tax breaks to pursue the stupid idea, we continue to waste huge amounts of money and time for something doomed to fail.

The ethanol industry is dead on arrival. Let's just admit it, start to open up our land and coastlines to the hundreds of billion of barrels of oil available, and then slowly look for real, viable alternatives.

The fear generated from marketing ethanol that we are somehow some type of dire need to find alternative fuels is an outright lie. The results of the debacle show that fear-induced initiatives never work, as it isn't thought through, but enacted for political expediency.

Ethanol is a poor and misguided investment of time and money. We need to move on, knowing we aren't in a hurry, and there's plenty of oil for decades to come we can access and produce instead of investing in the losing ethanol industry.

Wednesday, February 4, 2009

Gold Investors Seeking Haven and Profits

Now that much of the forced liquidation seems to have left the market, gold is starting to perform like the haven of safety usually has in tough economic times, and gold investors and regular investors are flooding to the market to not only be safe, but make some money from gold and its rising prices. Consequently, the U.S. dollar is starting to act like it really is with its poor underlying fundamentals, which had been hidden by the forced liquidation period pushing up its value as funds and companies sought to raise desperately needed capital.

Gold investors should be able to put their money into any well run gold producer this year and do well, along with investing in gold futures, which will continue to run up. Other gold investments set to do well will be gold ETFs, which with the larger companies are saying they're having no problem acquiring the needed gold to line up with investors' demand.

On the other hand, some gold coin sellers have said with some coins they're having trouble meeting specific demand, saying they have waiting lists into the weeks. Either way, gold in general will continue to perform strongly in safety and price, and gold investments won't disappoint this year in any way.

Even though gold was one of the better performers last year, the temporary resurgence of the U.S. dollar kept it from moving upwards when it should have been. That performance is about to rise again for gold, consistent with its usual consistency and price increase.

The huge amount of money pushed in the stimulus packages are starting to concern investors - as it should - and they see the U.S. dollar will start to gradually collapse under the mighty force of the fiat money printing press, which is the only way it will be able to be paid off. But that will lead to inflationary pressures, which will again push traders and investors toward gold.

What remains to be determined is how long it will take, not whether the time arrives. But either way, gold is going to break out again this year, and most analysts are forming a consensus that gold will push past the $1,000 barrier before 2009 is finished. And I think they're right.

Inflation is being held in check from the fact that people have stopped buying things or traveling much, holding down energy prices for now. That will change as the general economic struggles improve some, but then inflation will surge forward, which will benefit gold prices and gold traders and investors as well. Gold futures will continue to rise for some time to come, even if it's a bumpy ride at times.

The current record for gold is at $1,030.80 an ounce, recorded in March 2008, and that has a real possibility of being broken this year, depending of course on the pace the economy falters and havens of safety diminish.

Goldman Sachs (GS) has even increased its forecast for gold prices to reach the $1,000 an ounce range within a short three months, saying the demand for safety is increasing far beyond what it thought it would. Formerly they thought it reach only about $700 an ounce.

Every possible way of buying gold is in demand, from holding it physically, to futures contracts to investing in exchange-traded funds (ETFs). All of it is being brought about from safety and inflation risks in the market.

Physical gold has been in huge demand as the unbelievable and unprecedented and foolish bailouts have committed the government to far more money than it has to spend, and could virtually destroy the value of the U.S. dollar and bring it to be a very weak currency, the reason for the migration toward owning gold coins, which in a number of cases is taking longer and longer to fulfill orders.

Some of the gold producers from North America that have been recently upgraded by UBS because of gold as a haven of safety are UBS upgraded Agnico Eagle Mines (AEMO) (AEM), Barrick
Gold (ABX) (ABX.TO), Eldorado Gold Corp (ELD.TO), Newmont Mining (NEM) and Goldcorp Inc (GG) (G.TO) to "buy" from "neutral."

For Centerra Gold (CG.TO) and Franco-Nevada (FNV.TO) UBS retained its buy rating and target prices for the gold companies.

Moving quickly to take advantage of the volatile market, the largest gold-backed exchange-traded fund, the SPDR Gold Trust said its current gold inventory is at its highest levels, now standing at 859.49 tons. A huge increase in just a couple of days from 6.12 tons of gold it held on February 2.

One interesting factor in the overall gold picture is whether Barack Obama will get his almost $900 billion economic stimulus package passed. If he does, gold should skyrocket, if he doesn't, it should climb based on fundamentals alone, but it may not rise nearly as projected with the stimulus plan factored into the prices. The gold bulls would be slower to move it up, although there aren't many safe places to put their money regardless. The stimulus package would just make it happen much quicker, as a sense of urgency would settle in.

There's no doubt that gold futures and most other companies and ETFs related to gold will rise with it in 2009. With few havens of safety left, gold, and its cousin silver should flourish during these tough economic times, and gold investors will flourish with them.

Silver: Pan American Silver in Public Offering

Pan American Silver Announces Public Offering of Common Shares

Pan American Silver Corp. (TSX: PAA)(NASDAQ: PAAS) (the "Company") announced today that it has filed a preliminary prospectus supplement to its existing base shelf prospectus with the securities regulatory authorities in each of the provinces and territories of Canada and has made a similar filing with the SEC in connection with a public offering of its common shares to raise gross proceeds of US$90 million (the "Offering").

The Company will also grant to the underwriters of the Offering an option, exercisable for a period of 30 days following the filing of a final prospectus supplement, to purchase additional common shares for consideration of up to US$13.5 million.

The Company expects to use the net proceeds of this Offering to fund acquisitions, development programs on acquired mineral properties, working capital requirements and for other general corporate purposes.

Goldman Sachs Canada Inc. and CIBC World Markets Inc. will act as co-lead managers and joint book runners of the Offering.

A copy of the preliminary prospectus supplement and the base shelf prospectus may be obtained from your Goldman Sachs sales person or Goldman, Sachs & Co., 85 Broad Street, New York, NY 10004 Attention: Prospectus Department (212-902-1171 or toll-free 866-471-2526, facsimile 212-902-9316) or by emailing

Copies of these documents may also be obtained from CIBC World Markets Corp., 425 Lexington Avenue, 5th Floor, New York, New York, 10017, by fax at 212-667-6303 or by email at You may also obtain a copy of these documents in Canada from CIBC World Markets Inc., by fax 416-594-7242 or request a copy by telephone at 416-594-7270.

This press release shall not constitute an offer to sell or a solicitation of an offer to buy common shares nor shall there be any sale of such securities in any jurisdiction in which such offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of any such jurisdiction.

About Pan American Silver

Pan American Silver's mission is to be the world's largest and lowest cost primary silver mining company by increasing its low cost silver production and silver reserves. The Company has eight operating mines in Mexico, Peru, Bolivia and Argentina.




Pan American Silver Corp.
Kettina Cordero
Coordinator, Investor Relations
(604) 684-1175

Pan American Silver Corp. looks to raise as high as $103 million in the public offering.

Ethanol: Archer Daniels Midland Company

Even though Archer Danels Midland Company (ADM) reported extraordinary profits for the economic climate they're operating in, those very profits caused consternation among many industry watchers, and even resulted in JP Morgan downgrading them from their suspicions.

Ethanol has been a huge downward pull on the company, as low gas prices and demand make it a disastrous sector to be operating in; and there's no quick way to get out of it. That's what happens when huge companies like Archer Daniels Midland Company suck from the government teat and then get sour milk. This is going to be the story of ethanol and companies trying to exploit taxpayer financed loopholes that give them tax credits that prop up and create an otherwise non-existent market.

Clueless Archer Daniels Midland Co CEO Patricia Woertz said during a conference call that the company didn't foresee "the depth of this current economic crisis or the decline in gasoline demand.” Strange, even a general bystander saw that the economic pressure would cause consumers to stop driving and traveling as much. That comment doesn't make much sense.

As far as the drag that ethanol had on Archer Daniel Midland Company profits, losses from ethanol, and to a smaller degree from other bioproducts came to a huge $111 million just for the three months ending in December.

Also during the call, the third-largest U.S. ethanol producer, Archer Daniels Midland Co., siad that the ethanol business is "challenging." Duh! Ethanol isn't just challenging, it's ignorant and needs to be dropped as a taxpayer subsidized socialist project it is.

What this shows is that any something happens in the economy to slow it down, ethanol will hit companies hard, along with its workers and investors, and cause everyone pain. All that because the government has blocked oil companies from drilling the hundreds of billions of barrels of proven oil reserves under U.S. land or coastlines.

We need to forget the misguided and criminal renewable fuels standard and forget this waste of time and billions of dollars on pursuing a pipe dream just so the government and its sycophants can say they're doing something about the alleged energy crisis that only exists because of government regulations creating it.

So far ethanol production capacity has plunged by 21 percent, that much being shut down in the U.S. as the numbers don't make sense. Ethanol capacity has fallen from 12.9 billion to 10.2 billion.

The response of Archer Daniels Midland Company to the disaster? They're going to make more ethanol facilities, as they're close to finishing two more ethanol plants in Cedar Rapids, Iowa and Columbus, Nebraska. What a waste of investors' money.

According to Archer Daniels Midland Company Chief Executive Patricia Woertz, profits for the company came for the most part from their agricultural services division, surging by $143 million for the quarter.

Even so, most of those profits came from successful hedging that locked in crop prices, giving them a big edge over their competitors who didn't fare nearly as well. The problem of course is there was some luck involved with those successful commodity futures hedges, and it isn't something that is reproducible going forward.

One successful element that can be reproduced for the ethanol company is the huge fee increases it charged for shipping grains overseas. That is the only bright spot for the immediate future that gives credence to the otherwise dubious profit gains of 24 percent, which was very suspect considering the rest of Archer Daniels Midland Company competitors did so poorly.

Analysts were not so kind with Archer Daniels Midland Company Chief Executive Patricia Woertz when she refused to identify where the profits specifically came from, with some even saying investors should be wary when they aren't allowed to look under the hood to see what makes it work.

That's another way of saying that there was a lot of luck involved, as when asked a number of times, Woertz refused to let it be known what made the company so profitable in such terrible conditions.

Again, if it was something reproducible, it would have been quickly identified by Woertz, as it would have been a competitive advantage which would have caused Archer Daniels Midland Company stock to surge ahead of its competitors.

So while ethanol pulled down ADM stocks, what evidently looks like a lucky timing of some hedging gave the company some good numbers. That unrepeatable situation has the ADM Corporation looking good, even though ADM stock quotes are not looking as good as you would expect in these circumstances.

ADM will probably be under more pressure from the tremendous numbers just because they revealed an unusual circumstance that obviously wasn't related to operational skill and productivity. That means that the guidance given that profits will be under pressure going foward for Archer Daniels Midland will be accurate, and the downward pressure of embracing the failing ethanol industry, as well as fairly long term economic slowdown will start to affect the grain company like any other.

This profit performance was an anamoly, and Archer Daniels Midland Company and Patricia Woertz know it. This is why any ADM news going forward won't be in line with what just happened with the company. It makes you think it would have been better to have underperformed so the obvious anamoly wouldn't have been so obvious and glaring.

Now the ADM stock will be under further pressure, assuming they won't be able to repeat the lucky hedging, or increase shipping fees at the rate they have been. Put that together with ethanol pummeling the company profits, and there isn't really any good news for ADM in the near or mid future.

Tuesday, February 3, 2009

Oil Refinery Workers New Labor Contract

Union negotiators for oil refinery workers have tentatively agreed to a new contract which represents approximately 24,000 union members.

The new contract deals with labor issues like wage and benefit levels, which the details of the agreement weren't released.

If there had been a strike, it would have affected up to 10 percent of the overall refining capacity in America's oil industry. Other reports say the strike could have affected close to two-thirds of the capacity to make fuels in general, gasoline and diesel.

Details of the oil refinery workers deal will be released sometime on Wednesday by their representatives of the United Steelworkers union. Signing off on the deal was the National Oil Policy Committee, which still has to be ratified by local union units.

Some of the large oil and gas companies that would have been affected by the strike were Exxon Mobil (nyse:XOM), Royal Dutch Shell (nyse: RDSA), BP (nyse:BP) PLC, Valero (nyse:VLO), and Chevron (nyse:CVX), of close to 60 oil producers in general.

Besides higher wages, other issues being negotiated for the oil refinery workers were cost-of-living increases and full benefits for medical, dental and vision; both for current and retired oil workers.

The deal was worked out with Shell Oil, which will also be extended to the other plants, including Valero Energy Corp., Exxon Mobil Corp., Chevron and BP Plc. The deal, if approved, will keep up to six refinery plants from closing, and about 1.7 barrels a day from going off line.

Some of the known parts of the contract are a three percent raise for each of the three years of the contract, along with a signing bonus of $2,500 if it is approved before February 16.

Fuel and oil demand has fallen so much that the refineries have slowed production after falling prices put downward pressure on margins. Oil processors have had a record number of days of making gasoline at a loss, measured by futures prices.

The two largest refiners in America, ConocoPhillips and Valero were leading the fuel production cut in oil refinery output.

Gas prices had surged by 10 percent last week as the possibility of a strike loomed over the oil and oil refinery industry.

On the New York Mercantile Exchange, gasoline for March delivery increased 1.68 cents to $1.166 a gallon. Gas prices across the nation grew to $1.89 a gallon according to AAA.

Now that a strike is probably averted, we should see a corresponding fall in gasoline prices as demand continues to fall.

If things do change economically, this new contract could be a diaster for union members, as higher operating costs through increased wages and benefits could put many oil refinery workers out of a job in the months ahead. But that's how unions always work, as they overreach and cause loss of jobs, while benefitting only some of the members.

For the week ending January 16, oil refinery production had operated at 82.5 percent of capacity, down significantly from the 85.2 percent the week before. It'll a long time before gas and oil demand increase in any major way.

Motorists in the U.S. continue to drive much less, as for the second year they've driven at a lower rate than the previous year. According to the Federal Highway Administration, vehicle miles have plunged by 5.3 percent or 12.9 billion miles. We should see that continue on, and oil refineries operating at even less capacity before it turns around.

Monday, February 2, 2009

Ethanol: How to Make Ethanol

While ethanol is a disaster, it's interesting to see the many people that look at it as a viable alternative energy and fuel, and search into how they can make ethanol on their own.

Regular ethanol has been extremely destructive to numerous small engine power equipment, and during the winter time we notice many of the snowmobiles, chainsaws and generators at the small engine repair shops as the alleged biofuel continues to destroy the parts and engines of the products, even though some proponents continue to pretend it's completely safe to use, while the equipment of ethanol users is destroyed, and in some cases becomes dangerous to use because of the potential consequences of getting stranded; as in the case of snowmobiles or motor boats.

Some even continue to claim the very expensive fuel and poor mileage (as far as it relates to vehicles) is inexpensive. But some studies have shown the price of gasoline would have to reach about $2.33 a gallon to be the equivalent of the high cost of ethanol.

So it can be understood why people that like to experiment and try things out would want to make their own ethanol for the purpose of accomplishing the task, it's hard to know why other than that someone would want to put it in any type of equipment they use.

Making ethanol is of course nothing new, as people have known how to make ethanol for a long time, using fermentation and the distillation of sugar and starch crops. Some of the obvious crops still used today to make ethanol are corn, cornstalks and sugar cane (in Brazil). Other crops used are potatoes, wheat and peelings from fruit and vegetables. Grass and wood chips or sawdust can be used as well, among many others.

It takes a lot of this stuff to even make one gallon of ethanol, as it takes about 10gallons of crops or other material to make a gallon of the fuel additive. So picture wanting about 10 gallons of the stuff. You'd have to have access to about 100 gallons of raw materials in order to make that much. It would take a ton of work just to gather that much together, even if someone was willing to give it to you to work with.

So what's the process on How to Make Ethanol?

To turn raw materials into ethanol, it requires five steps:


Whatever material you decide to use, it has to be converted by the sugars being broken down in the process. That's either done manually or by adding an enzyme.

In the fermentation part of the process, you're at the creation of alcohol stage, and so add yeast in a similar way you would if you were making wine.

The next stage in How to Make Ethanol is to use a still for the purpose of separation of the alcohol from the rest of the liquid. This is called Distillation.

For the next two steps you filtrate the liquid in order to remove the impurities in the liquid as well as the excess water remaining.

Materials needed to make ethanol:

A lidded plastic bucket or barrel

Because the liquid will start to ferment once the fruit or raw material is broken down, you should only fill it to about one-third full, or you'll end up with a messy overflow of the ethanol.

When using yeast, don't think in terms of the type you'd use for making bread. Rather, to make ethanol, us the type you would acquire from a store with supplies to make wine. That type of yeast is tolerant to ethanol.

Once you add the yeast to the mixture, use the hydrometer to measure the sugar content. Once you have that figure, cover up the barrel.

Simply let it sit for several days while checking the sugar content once a day. What you're looking for is the sugar content in the mixture to gradually decrease until there's zero sugar left in the ethanol. That will usually take about 10 days.

When that part of the process is completed, the mixture should be immediately distilled, or you risk damaging whatever equipment you might put the fuel into.

This could be an enjoyable experiment to have fun with, but doing this allows you to see the number of things involved with making ethanol, the high amount of inputs, and how a lot can go wrong with it while it's being made, which could damage your equipment.

In the end, it can be fun learning how to make ethanol, but I sure wouldn't really want to use it other than in something old to learn the damage it can cause.

Gold | Yamana Gold - Fulfill Promise in 2009?

With the price of gold assured to go up in 2009, many investors are giving a close look at gold mining companies as a significant part of their investment portfolio. To that end, Yamana Gold is being reconsidered again for 2009, after disappointing investors in 2008.

Many thought Yamana Gold was the darkhorse of the sector, and had tremendous upside potential in 2008. Conseqently it plunged in value to under $4 a share, as gold was under pressure from forced liquidation and copper prices plunged as well.

That's probably the chief challenge in 2009 for the company, as they look at cutting their exposure to copper resources to 19 percent, down from the 36 percent of the company exposure to copper in 2008.

As far as its commercial gold equivalent ounce goes, Yamana Gold is looking to increase by 36 percent to 1.35 M oz GEO in 2009. A number of investors believe this year could be a solid one for the precious metals company, looking for prices to almost double for the year. That could definitely happen for the gold company, considering the real possibility that gold prices could rocket up this year.

Yamana Gold stock should move along with that gold price increase, assuming managing their exposure to copper is successfully implemented.

Another key factor for all mining companies has been the lowering of operational costs as energy prices have fallen to levels not seen for some time. If those costs continue to stay down, it could help all mining companies, including Yamana.

One thing that will bear watching will be the commissioning risk the company is exposed to at its mining site in Gualcamayo in Argentina, along with its Sao Vincente mining site in Brazil. Silver production and prices will also be a major contributor to the success of the company in 2009. If gold prices go tremendously high, it could not only bring up the price of silver with it, but override it altogether through its successful surge, whether silver performs well or not.

I expect that silver prices could by percentage even outperform gold in 2009, and so will rather be a positive impact on the company rather than a negative. Hopefully they'll produce enough to make a big difference.

With a number of the long-term pipelines shut down or scaled back, the acquisition by AngloGold Ashanti of a 33.33 percent stake in the Boddington Mine joint venture could put pressure on Yamana and other gold mining companies to go into consolidation mode to shore up the losses connected to their gold pipeline reductions.

Gold stocks overall should be up for 2009, and Yamana Gold will participate successfully in the upwards move.

Again, as operational costs for gold mining companies decrease while the price of gold increases, this should be one of the better years for the gold industry in some time. Gold investors should enjoy a lot of positive perks and success too.

So with gold and metals extraction costs declining, and gold companies pretty much operating at lean levels, 2009 will be a banner year for the quality gold companies.

Yamana Gold is positioned to take full advantage of theis climate, and lessoning their exposure to copper while keeping operating costs low, should lead them to a great year.

Many people thought last year was going to be a breakout year for Yamana, but forces like forced liquidation and deleveraging kept them - like most gold mining companies and gold futures - from advancing in the way they should have.

This year is much more predictable as forced liquidation seems to be unwound to a large degree in a way that hedge funds should increase investment in gold and gold-related companies and products as gold futures once again become the place of safety investors looking for a financial haven expect.

What was expected by many of Yamana Gold in 2008, should be experienced by gold investors in 2009.

Sunday, February 1, 2009

Ethanol | Greater Ohio Ethanol

Greater Ohio Ethanol - Another Reason to Abandon the Ethanol Debacle

The failure of the ethanol initiative is again unveiled as the Greater Ohio Ethanol company can't find a buyer that could justify the price and debt the company is attempting to command and owes.

Costs for the ethanol plant were an astronomical $150 million, without anything but a pathetic government mandate to force ethanol as a biofuel on the public. Even with taxpayer subsidies the biofuel can't even come close to producing a profit.

Unless Greater Ohio Ethanol is basically given away, it's not even worth the trouble. Even then it's doubtful it would be worth the headache of an inevitable shutdown. If someone takes this responsibility on, they deserve what they get, as it's been a losing proposition from the beginning.

While the ethanol plants' creditors are obviously trying to patch up as much damage to their investment as they can, they have absolutely no foundation to stand on, the reason deal after deal has been turned down.

So far two companies have made bids for Greater Ohio Ethanol, but they've both been rejected. Both companies have stakes in Greater Ohio Ethanol, as Paladin Capital Group of Washington, D.C. provided the equity to build the Lima plant, and NextGen Ethanol owns two of the ethanol plants currently operating.

Bills continue to mount in spite of the failed bids, and it'll keep getting worse the longer the bankruptcy proceedings last, as they're costly as well. There are still operational costs at the ethanol plant, along with construction bills that have yet to be paid. What a mess the misguided ethanol industry has become, and Greater Ohio Ethanol is a cover story to emphasize the debacle.

With creditors anxiously looking on, they've filed a motion to convert the Chapter 11 bankruptcy to a Chapter 7, as those unsecured debtors are in a secondary position, and probably will receive nothing under the Chapter 11. At this time a sale of the company would only benefit the senior, secured lenders. Of course the unsecured debtors knew this when they signed on, so it's nothing but their own fault for taking the risk.

Lima, Ohio is finding out the hard way, along with much of the midwest, that ethanol as a business is basically fools gold, and it's going to remain that way. The Greater Ohio Ethanol company, along with the numerous other ethanol companies, is a narrative showing ethanol as a biofuel needs to be abandoned as a viable alternative. The numbers just don't add up, and it's a waste of billions in taxpayer dollars.