If you were to flip on the TV today and tune into your favorite financial news network, you would swear that the hottest commodity markets are the energies and the Dollar. I tend to disagree. In fact, I believe that the hottest markets for 2006 will be Sugar and Corn. Yes, Sugar and Corn. Furthermore, these markets will continue to be some of the hottest and most economically important plays that you can make in your portfolio in the next 10-15 years. Why, you ask? Look no further than the keys in your pocket.
Over the past few years, ethanol and other alternative fuel sources have been given more attention as likely fuel sources for the future. The ecological and long term economic viability of these products is undeniable, and the Big 6 is starting to take notice and act rapidly to employ these new fuel sources. First, a primer on ethanol fuel, since I believe it will be a strong and critical driver of corn and sugar futures going forward. According to Ethanol.com, "Ethanol is a clean-burning, high-octane fuel that is produced from renewable sources. At its most basic, ethanol is grain alcohol, produced from crops such as corn. Because it is domestically produced, ethanol helps reduce America's dependence upon foreign sources of energy." Sounds simple enough, and it is.
Most misconceptions of ethanol come from actual use of the product. Ethanol is not a total fuel replacement more than it is an additive to fuels in common use today. Ethonol.com tells us that "Any amount of ethanol can be combined with gasoline, but the most common blends are:
E10 - 10% ethanol and 90% unleaded gasoline E10 is approved for use in any make or model of vehicle sold in the U.S. Many automakers recommend its use because of its high performance, clean-burning characteristics. In 2004, about one-third of America's gasoline was blended with ethanol, most in this 10% variety.
E85 - 85% ethanol and 15% unleaded gasoline E85 is an alternative fuel for use in flexible fuel vehicles (FFVs). When E85 is not available, these FFVs can operate on straight gasoline or any ethanol blend up to 85%.
