Monday, January 30, 2006

Portfolio Update, Sugar, Ethanol

Here's the portfolio as of the end of the day today. Couple of things worth noting today:

1. Bush is supposed to talk about ethanol in the State of the Union:
http://www.cnn.com/2006/POLITICS/01/29/bush.sotu.ap/index.html

The main way that the US produces ethanol is from corn. The corn usage for ethanol has tripled over the last 7 years and I expect this pace to continue until oil prices drop in, oh, around 2015 or so. Ethanol is the 2nd largest use of corn (animal feed being a dominant #1).

We saw what happened in the past year to sugar prices when Brazil started converting sugar into ethanol, and the same thing could very well happen with corn. I will look pretty hard at picking up some more corn contracts in the near future.

For a quick price history of corn, it has pretty much bounced around between 200 and 360 cents per bushel since the mid 70's. I'll try to put some price charts up soon.

Another amusing thing to note is that even at today's high fuel prices, ethanol is not yet a better economic alternative than oil and natural gas. It takes too much energy to make it. But thanks to government subsidies, ethanol magically becomes more economic. The push by Dubya for more ethanol can only help the case for corn.

2. From Kevin Kerr in the Daily Reckoning, "Every ton of sugar has the potential to be 1.2 barrels of oil." Nice to know when you are long sugar in a world where there is absolutely no slack in the oil supply/demand outlook. Like corn, high energy prices should provide a floor for sugar prices in the future.

3. Along this same note, I was listening to Science Friday a few weeks back and heard guest Lester R. Brown predict big problems for the world due to food shortages in the coming decade. He also mentioned that high energy prices would cause rising food prices since they could be converted into energy as well. His book can be bought here:
http://www.amazon.com/gp/product/0393328317/qid=1138691600/sr=8-1/ref=pd_bbs_1/104-7704375-6993532?n=507846&s=books&v=glance

I plan to read it and probably post some comments about it here. Just goes to show that you are often better of following science and investing based on that than just reading the business section or the WSJ, where millions of investors are already trying to get their "edge". You're better off talking to the geeks. Not that I'm one to talk, I'm probably one of three people in the world blogging about commodities. And in a surprising twist, I am not even single, so go figure that one.

And onto the portfolio (with dreams of a retirement at 30):

Open positions as of 1/30/06:
Date.......Contract..Position..Qty..Month/Yr..Entry Price..Last Price..Profit/Loss

1/18/06.......Corn....long............1.........Sep 07..............257..................261.5...........$225.00
1/27/06.......Cotton.long............1.........Dec 07..............63.....................62.65..........($175.00)
12/8/05.......Coffee..long...........1.........Dec 06.............103.40..............130.80.......$10,275.00
1/24/06......Soybeans..long.......1.........Jul 07...............623...................643..............$1,000.00
5/24/05.....Sugar...long.............1.........Oct 06.............8.70.................17.05............$9,128.00
7/27/05.....Sugar...long.............1.........Mar 07............9.06..................16.78............$8,411.20
1/30/06......Sugar...long............1.........Dec 07............15.55.................15.40............($168.00)

Total Profit/Loss on Open Positions: $28,696.20
Cash: $1,888.35

Net Value: $30,584.55

2 comments:

Peehu Sharma said...

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