Michael Pascoe writes:

The sad collapse of the Doha world trade talks
overnight might actually provide a reason to be interested in the US ethanol
float being hawked around the Australian market by the Investec chappies
(assisted by UBS and Morgan Stanley) –
and being uncritically swallowed by the financial press.

The US
walking out of the Doha round put years of failing negotiations out of their misery.
Neither the US nor Europe have the political will to buck their powerful farm
lobbies, which means agricultural markets remain fundamentally corrupted and
consumers and developing nations are worse off. The occasional presidential rhetoric about helping poorer nations
remains just rhetoric when it clashes with domestic political self-interest.

But the maintenance of the United States’ massive
farm subsidies is at least provides some justification for the float of Global
Ethanol – a chance for local investors to get a cut of US tax payer
largesse. In my opinion, there’s not
much else going for it.

Global Ethanol is seeking US$350 million
from Australian investors to pay for its 60% interest in one-and-a-half
US corn-to-ethanol plants and its intentions to build three more. For
their money, the new investors will get 57% of the company while the
founders (Investec and key executives) put in US$140 million for 43%.

Global Ethanol boss Trevor Bourne has been
getting away with such uncritical pap as The Oz‘s “Ethanol bonanza heading
offshore”.

“A Brisbane company ready to spend $1
billion to build five ethanol plants is being forced to build them in the
United States rather than Australia because the American market is more
mature,” says The Oz.

By “mature”, I guess they mean the US
government gives refiners a 51 US cents a gallon tax credit, imposes a 54 cents
a gallon tariff protection against imports and bankrolls US farmers with US$20
billion a year effectively to subsidise the cost of the feedstock. Oh, and
various US states force petrol retailers to include 10% ethanol in
their mix.

The US
ethanol industry, then, is pretty much a creature of government policy and should
evolve into a utility structure after the usual rush of investors to grab a
slice of the taxpayers’ money. There is no shortage of Americans building their
own plants.

Global Ethanol itself seems very much a
work in progress. It doesn’t make a profit from its existing investments and it
doesn’t know how much its three new plants will cost to build. But that doesn’t
stop gullible media lapping it up. Now, how is CuDeco going…