Red-Hot Resources

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Thursday, December 07, 2006

A Harvest of Profits for 2007

A Dow Jones/Marketwatch reporter asked me about my opinion on corn for 2007. Here's what I told her:

Corn/ethanol may be one of the hot commodities to watch. That’s because of the twin demands on corn – both for ethanol and to feed an increasingly hungry world.

And it’s not just ethanol use here in the US. China is now the third-largest ethanol fuel producer after Brazil and the United States. Production of fuel ethanol and corn alcohol consumed 8.9 million tons of corn in China last year, accounting for 44.5% of industrial consumption of corn.

Wait, it gets better! China is planning to increase the use of ethanol fuel from 20% of fuel consumption to more than half by 2010 with ethanol consumption reaching 3.25 million tons per year. Can China actually do that? Probably not, especially with its gasoline use soaring. But it’s going to make a serious attempt, and that will strain the global corn supply.

Already, right now, we’re seeing limited exports by China and Argentina and the possibility of a ban on Indian corn exports.

China is very significant. As recently as 2003, it produced 19% of the world’s corn exports. Now, it is real danger of becoming a net corn importer in the next few years. China's corn exports stood at 2.27 million tons in the first three quarters of the year, down 68.3% compared to last year, according to statistics recently released by
China’s Ministry of Agriculture. Meanwhile, imports hit 59,000 tons. That’s 43 times more corn than was imported last year at this time.

India, meanwhile, will probably consume more corn in 2007 than it grows. And increased droughts in the US will probably hurt the corn crop. All in all, I’d say 2007 will be a bullish year for corn.

But you know what I think will have an even better year? Uranium! Heck, there was a 42 million pound shortfall this year, America’s Navajo tribe, which is sitting on the Saudi Arabia of uranium, is refusing to negotiate mining rights, and Cameco’s aptly-named Cigar Lake Mine is flooded and won’t come online as planned in 2008. You want to bet on one commodity in 2007? Make it uranium.

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