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Turning Wood Chips Into Gasoline? NJ Firm Hopes To
Published: Thursday, 3 Oct 2013 By: Brad Quick, CNBC field producer Source: Primus Green Energy View from the north side of the demonstration plant. A New Jersey company has opened an energy facility that converts cheap natural gas into gasoline, and the firm hopes to eventually convert biomass—wood chips or switchgrass, for instance—and even to make jet fuel. The process being carried out by Primus Green Energy at its synthetic gas-to-gasoline, or “STG+,” facility, which launched Wednesday, is not new, but the size and efficiency of this particular plant are. Primus hopes to create about 100,000 gallons of gas a year—a small amount compared with modern oil refineries, but still making it the largest facility of its kind anywhere in the world, Primus said. Primus takes cheap natural gas and through a chemical process, converts it into more expensive gasoline that can power your car. Primus is using the new plant as a testing facility, a scaled-down version of how it hopes its future plants will operate. The company hopes the operation will be enough to show investors that the technology is both economically feasible and possible to build on a larger scale. Pavel Molchanov, an energy analyst with Raymond James, said Primus has to prove it can raise capital before it can be successful. “This is an early stage company. They’ve yet to produce gasoline commercially. It’s going to take some time to scale up,” Molchanov said. “With any scale up comes the need for a large amount of capital. Raising capital is never easy, particularly for an early stage business.” To date, Primus has raised about $60 million, all of it through an investment from IC Green Energy, the renewable energy arm of Israel Corp . Primus is working with Credit Suisse to raise additional capital by the end of the year. ( Read more : Six myths about renewable energy) A larger facility that will produce 28 million gallons a year, which the company hopes have built by 2016, will cost roughly $280 million. That’s cheaper than what it would cost to build an oil refinery of the same size. Natgas price worries? Not really, says CEO Source: Primus Green Energy Primus Green Energy CEO Robert Johnsen Molchanov said he sees the cost of natural gas as another potential headwind. “If natural gas prices go up, it would not be helpful for their margins,” he said. “I’d like to see what would happen if prices doubled.” Primus CEO Robert Johnsen said that’s not a scenario that keeps him up at night. The natural gas industry just released its winter forecast, and both supply and demand look as if they’ll remain steady, with prices hovering at around $3.47. Johnsen estimates that at current natural gas prices, it costs him about $1.65 to create one gallon of gasoline, far cheaper than the big oil refiners. And with those kinds of margins, prices would need to move significantly higher before the process was no longer profitable. “Natural gas would have to be in the double digits for us to be uneconomic, given the current forecast for gasoline prices,” Johnsen said. Continue reading
In Agriculture, Uncertainty Is Certain
By Glen Cope For the Capital Press Published: September 26. 2013 Any farmer will tell you that with agriculture things don’t always go as planned. In fact, farmers often refer to farming as a gamble. We never know from the beginning of each growing season if our efforts will pay off in the end. A farm, like any business, is subject to many different variables that can each be vital factors in achieving a profit. One variable that sets agriculture apart is Mother Nature. The weather, when cooperative, can be a farmer’s best friend in terms of raising successful crops and providing ample forage for livestock. However, many times it has proven to be one of agriculture’s biggest adversaries. Both the widespread drought of 2012 and the more regional droughts during the previous year are prime examples of what a lack of moisture can do to food production. The flip side of that extreme is too much moisture. What farmer in the Midwest could forget the Mississippi River flood of 1993, which completely covered entire fields with water, drowning 20 million acres across nine states. Other examples of the tough hand Mother Nature can deal are frost, wind and hail damage to crops and infrastructure, which can also be common occurrences on the farm. Another uncertainty that many farmers find equally as frustrating as the weather is market fluctuations for the crops they grow. Aside from normal supply and demand pressures on the market, other influences include the state of both the global and U.S. economies, growing conditions in competing countries and even hedge fund managers, who may find agriculture commodities attractive investments one day and completely pull money from them the next. Farmers always try to plan for a small profit after crops and livestock are sold. However, one can imagine the disappointment when something completely out of a farmer’s control causes the market to plunge. This uncertainty can make financial planning difficult for the best of farmers. This is why the phrase “farmers are price takers not price makers” is often heard among the people who make their living off the land. With all the unknowns related to farming, it is extremely important that some of the risk be reduced. It is high time that our policymakers give farmers some assurance that if another bad weather year occurs, they won’t be financially ruined because of the high cost to put out a crop. If it were not for crop insurance, it would have been nearly impossible for even a debt-free family farm to survive a year like 2012. Crop insurance allows farmers to farm for another year. If another 1993 or 2012 occurs, many farmers will be forced to sell out because they have so much invested in the crop before it is even harvested. In light of all the uncertainty of farming, farmers need Congress to pass the farm bill and save the farm when disaster strikes again. Glen Cope is a fourth-generation cattle rancher from Missouri. In 2012, he served as chairman of the American Farm Bureau Federation’s Young Farmers & Ranchers Committee. – See more at: http://www.capitalpress.com/article/20130926/ARTICLE/130929927/1009#sthash.whf7ksKZ.dpuf Continue reading
Farmland Values and Credit Conditions
AUGUST 21, 2013 By: News Release CHICAGO–Acording to the latest AgLetter published by the Federal Reserve Bank of Chicago, for the second quarter of 2013, “good” farmland values were up 17 percent from a year ago in the Seventh Federal Reserve District, which consists of Illinois, Indiana, Iowa, Michigan and Wisconsin. However, agricultural land values registered no gain in the second quarter relative to the first quarter of 2013, according to a survey of 211 agricultural bankers. The last time there was no quarterly increase in agricultural land values was in 2009. Generally, the stellar year-over-year gains in farmland values across the five District states masked the comparative weakness of the quarterly results. Moreover, the percentage of survey respondents anticipating farmland values to fall during the third quarter of 2013 was the same as the percentage predicting them to rise (7 percent); 86 percent of responding bankers expected farmland values to be stable. The District’s agricultural credit conditions were generally better in the second quarter of 2013 than a year earlier. The availability of funds for lending by agricultural banks was up relative to a year ago; the banks’ deposits were enhanced not only by high crop prices but also by payments for insured losses due to last year’s drought. Repayment rates for non-real-estate farm loans were higher than a year ago, with 94 percent of the respondents’ agricultural loan portfolio having no significant repayment problems. Renewals and extensions of non-real-estate farm loans declined from the level of a year earlier. The responding bankers perceived that non-real-estate loan demand for the April through June period of 2013 was below that for the same period last year. For the second quarter of 2013, the District’s average loan-to-deposit ratio edged up to 64.6 percent—12.6 percentage points below the average level desired by survey respondents. Finally, interest rates on farm loans rose for the first time since early 2011. Looking forward Crop producers will face tighter cash flows as their revenues decline (especially if crop prices slide further). Yet, the responding bankers did not expect agricultural loan volumes to rise for the July through September period of 2013 relative to the same period last year. In fact, some categories, including operating loans and livestock loans, were anticipated to shrink in the third quarter of 2013 relative to their levels in the same quarter of 2012, according to the survey respondents. Falling crop prices should bring relief to livestock producers, whose profits have suffered on account of the high feed costs in recent years. Continue reading
