The end of the ethanol boom coming soon? Investors watch out

Ethanol prices continue to rise, investors are enjoying tossing money hand over fist at ethanol producers, and somewhere in the melee a few voices are saying, "Um, perhaps we should think this through." Those voices were recently collected by Chicago Tribune writer James P. Miller, who found reason to think the heady ethanol boom may soon turn sour.

With some highly valued ethanol companies not even producing any biofuel yet, and others focusing heavily on getting IPOs settled, the value of these stocks is coming under scrutiny. Bear Stearns analyst Ann Duignan said in a recent report that ethanol producers "are likely seeing the peak of their margins now," before all of the ethanol production capability comes online and floods the market. Credit Suisse told investors in a recent report, adding, "the danger of overbuilding [ethanol plants] is a real one." The final picture is unclear, Miller says, since the complexities of the ethanol market (the federal alternative-fuel requirements, the size of the annual corn harvest and the fluctuating world price for a barrel of oil) make it a tough one to predict.

[Source: Chicago Tribune]

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