Doing the math - Chapter 23...
As corn farmers drool expectantly over the any-minute-now windfalls from the huge new biofuels market, we may lose sight on what is happening in the rest of the world.
Yesterday, Exxon Mobil announced second quarter profits of $10,360,000,000 (I think all the zeroes add drama, don't you?). Corn farmers need to keep this number in perspective. (Plus - this is PROFIT - not revenue)
For example: Exxon Mobil could overnight buy a major share of the alternative energy market with a few months' gravy. Even ADM, the 900 lb. gorilla of ethanol could be a target. Its market capitalization is significant - around $27B, but compare that with the profit stream above. Now factor in new ADM CEO Patricia Woertz - a gifted former oil company executive.
Hmmm - what could possibly happen here?
The moral to this story: wild amounts of profit are not going to rain down on the cornfields of the US. The value in ethanol is almost completely generated at the processor level. The corn is still just corn, right?
Moreover, the profits from producing ethanol are a revenue stream that can be bought on the NYSE or over a boardroom table. (Admittedly, ADM could go private, like many other companies are considering.) And the price is certainly no budget problem for the petroleum industry.