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Good news for ethanol producers like ADM (ADM), Verasun (VSE) and Pacifc Ethanol (PEIX).

The U.S. Department of Agriculture forecast that farmers will harvest 12.3 billion bushels of corn, up more than 570 million bushels from last month's estimate of 11.7 billion. That's down 6% from last year's record crop of 13.1 billion bushels, but 17% above the 2006 harvest.

VeraSun Energy (VSE), the country’s largest ethanol producer managed to handily beat the analysts' estimates for the 2nd quarter of 2008. Estimates for the quarter’s per share earnings ranged from a -7¢ to a positive 12¢, with the average of 18 analysts at 2¢ earnings. Actual earnings came in at 15¢ per share, well above the average and handily beating the most optimistic. The 15¢ per share also almost doubles the 8¢ earned in Q1, 2008. VSE’s total revenues of $1.015 billion also exceeded the average estimate of $924 million.

USDA_DOE_biofuels_letter_61208.pdf (application/pdf Object).

The link above is the Department of Energy’s response to several questions concerning biofuels' impact on food and energy prices. The questions are from Senator Jeff Bingaman, Chairman of the Senate Committee on Energy and Natural Resources. The 16 page report is in question-and-answer form and here are some selected quotes:

VeraSun Energy (VSE) President and CFO Danny Herron presented at the William Blair 28th Annual Growth Stock Conference 2 weeks ago. I listened to the replay, checked out the slide show and took some notes. The presentation was very upbeat, as they usually are. This is a company that has gone from a couple of plants to the nation's leading ethanol producer in the space of about 3 years. I was most interested in the comments concerning the ethanol market in general and the specific growth and profitability prospects for VSE.

First, some notes on ethanol production overall:

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Once-in-vogue ethanol stocks have taken a beating over the past year as investors went from wildly bullish to wildly bearish due to concerns about a production glut, and claims ethanol is a driving force behind rising food prices -- which could threaten its coveted government subsidies.

But Barron's Andrew Bary thinks the ethanol rally will resume. "The stocks are depressed, the businesses are profitable and the companies generally trade below the replacement cost of their ethanol plants."<!---->

VeraSun Energy (VSE) has reported 1st quarter earnings and the results could be considered very good, given the current sentiment for ethanol producers.<!----> VSE increased quarterly revenue by 257%, primarily by increasing the volume of ethanol sold by 223%. VeraSun sold 191.7 million gallons of ethanol, including 49.5 million gallons it purchased from other producers to resell to its customers. VeraSun’s own production increased 138.6% from the 1st quarter of 2007.

Sector Snap: Analyst says end of ethanol oversupply in sight

In Alternative Energy Hunt, Ethanol Under the Gun

I am writing this in response some of the debates going on around ethanol at the moment, and to provide some research driven facts regarding my position in the area and particularly in VeraSun (VSE).