This story was published by Bloomberg News on August 1, 2008. Molly interned for Bloomberg News from June to August in 2008 and from January to April in 2009. She covered the commodity markets, livestock derivatives, government bonds and foreign exchange. Molly was hired to the speed desk in March 2009. This is one of her favorite stories. It appeared on TOPWW, Bloomberg’s worldwide front page.

Aug. 1 (Bloomberg) — Pork prices in the U.S. are the highest in at least 11 years, squeezing profits for food companies, as more of the nation’s meat supply is shipped overseas and domestic hog producers shrink their herds.

Wholesale pork jumped 62 percent in the past four months to 88.9 cents a pound today, the highest since at least 1997, U.S. Department of Agriculture data show. Exports of the meat in May doubled from a year earlier as demand surged in China, according to the most recent USDA statistics.

The jump in costs is forcing makers of pork products to raise prices. All-meat hot dogs made from beef and pork by Goldstar Sausage Co. in Denver are up 25 cents a pound since May, and another increase is likely because the high cost of pork is eroding profit, owner Rick Rue said in an interview.

“You have to pass it along if you want to stay in business,” said Todd Purnell, president of F.B. Purnell Sausage Inc. in Simpsonville, Kentucky. “Nobody can stand to lose money for very long.”

U.S. pork exports in May totaled 481.3 million pounds, up 98 percent from 242.7 million pounds in the same month last year, the USDA said July 14. Shipments to China and Hong Kong increased more than sixfold to 137.7 million pounds.

“What’s producing this increase is the global demand for meat products, including China and India and other countries where income growth is stimulating meat demand,” said Ernie Goss, an economics professor and head of the Economic Outlook Center at Omaha, Nebraska-based Creighton University.

Rising Corn Costs

U.S. supplies also may shrink because the high cost of feed grain is forcing hog producers to liquidate their herds. Corn futures are up 74 percent from a year ago and reached a record $7.9925 a bushel on the Chicago Board of Trade on June 27.

“The high corn prices are the number-one contributor,” Purnell said by telephone.

Livestock producers are sending more hogs to be slaughtered and feeding them less to cut costs. U.S. processors will slaughter 2.091 million hogs this week, up 6 percent from 1.973 million a year earlier, the USDA estimates. Hogs sold to slaughterhouses in the Iowa-Southern Minnesota area were 0.9 percent lighter last week than a year earlier, USDA data show.

“You’ve got a demand increase and a supply reduction,” Creighton’s Goss said in a telephone interview. “Both contribute to an increase in prices, and we’re going to see more of that in the months ahead.”

Raising Prices

Some U.S. meat processors and grocers have been unable to raise prices fast enough to keep pace with rising costs.

“It’s impacted us tremendously from a profitability standpoint,” Goldstar’s Rue said in a telephone interview. “We are hoping that we’re seeing the ceiling right now. Normally we get a downtrend in prices and it comes out even. But it’s just been escalating and definitely cutting into our margins.”

At De An’s Pork Products in Brooklyn, New York, owner Guy De Angelis said he raised the price of the company’s Italian sausage about 10 cents a pound to $1.85 on May 26, the Memorial Day holiday, because of higher fuel costs. Another 15-cent increase may be needed to offset the jump in pork costs, he said.

“We try to absorb as much of it as we possibly can, but it’s difficult after awhile,” De Angelis said in a telephone interview. “It’s killing us.”

This story was published via The Medill News Service on June 4, 2008. It was written for a class while Molly was attending Northwestern’s Medill School of Journalism.

Five months ago, 27-year-old Latonya Black, a student at Washburne Culinary Institute of Kennedy-King College, realized she wanted “to be surrounded by food all the time.” Black called it “an a-ha moment.”

More and more Americans are having a-ha moments and enrolling in culinary schools across the nation — particularly in Chicago.

The National Center for Education Statistics’ 2007 “Digest of Education Statistics” reported that the number of Americans getting Bachelor’s degrees in the culinary field has skyrocketed.

In 2006, a total of 57 students were awarded degrees in “baking and pastry arts/baker/pastry chef,” up 83 percent from 31 students in 2004, and up 119 percent from 26 students in 2003. A total of 322 students earned degrees in “culinary arts/chef training” in 2006, up 35 percent from 239 in 2004.

A degree is not a necessary ingredient in a chef’s recipe for success. In fact, most chefs – degree or not – are still required to start working as line cooks, busboys or vegetable peelers.

“Just like other Americans, I felt like culinary school was kind of for people who just didn’t know what they wanted to do with their lives, some kind of backburner or you didn’t make it anywhere else, so you went to culinary school,” Black said.

Today, she is learning about cold soups and sauces and is set to graduate in May 2009 with an Associate’s degree in Culinary Arts. Black is ebullient about her experience and is a big proponent of culinary school. (Note: Top Chef fans might recognize Washburne’s kitchen – it was featured on Episode 8 this season.)

“I don’t think it’s necessary to get a degree, but it helps you along the way. It helps you get to the next level and make those strides a little bit faster… There are people who have been in the industry for 15 years and they’re just having that a-ha moment,” she said.

The a-ha moment is the crystallization of one’s desire to be a chef. Executive Chef Ethan Holmes, 33, described it as a “wild unflinching passion to cook or feed people” and “the absolute love of food and perfection.”

Holmes graduated from the New England Culinary Institute in 2001 and attributes his early success to a combination of the culinary degree and his total commitment to food. He giddily described looking at diver scallops in his Texas restaurant’s freezer.

“I’m back there oohing and aahing… like, these are the most beautiful scallops… I feel like I’ve stolen something from someone because they’re so beautiful,” he said.

Many executive chefs describe this commitment – not a degree – as a reason to hire. Still, no one denied the positive effect a degree could have on a chef’s salary.

“I think it’s like any other field, 20 years ago you practically didn’t need an accounting degree to do accounting. But nowadays, the more education you have the more advantages you have in terms of getting a job. When we first started researching the field of culinary, when I talked to chefs and restaurant owners they said, ‘I don’t just want to hire people who can cook, I want to hire people who can think,’” said Nancy Rotunno, the executive director and dean for the Institute of Culinary Arts at Robert Morris College.

Robert Morris will offer its first Bachelor’s degree in culinary arts this fall. They expect to have about 100 students in the program. It has previously offered Associate’s degrees and has about 300-350 students enrolled in those programs. Applications for students starting in the fall at the Chicago campus doubled compared to last year, Rotunno said.

“Quite frankly and pardon the pun, but food is a hot industry right now, and it has been for the last several years, so we’ve had a lot of interest,” she said.

One oft-cited downside of attending culinary school is the price. Holmes paid $51,000 for two years of culinary education.

“It cost me more to go to culinary school than it would have cost to go to law school,” Holmes said.

Chicago’s schools cost an average of $27,000 for one year of education. Washburne costs about $13,000, far below other area institutions, because it’s part of the City Colleges of Chicago. Black has already won a scholarship and hopes to be awarded more money.

The Cooking and Hospitality Institute of Chicago, which has over 800 students, is affiliated with Le Cordon Bleu and is regionally accredited. Tuition for a 15-month program is about $40,000.

Though he was unwilling to reveal enrollment figures, President Lloyd Kirsch said that business was good and that in the last four years, the school has expanded its campus by 20,000 square feet and added five industry-standard kitchens and two classrooms.

Malika Ameen, 33, is the executive pastry chef and co-owner of Aigre Doux. She was born and raised in Glencoe, Ill. but attended culinary school in New York. She estimates she paid about $16,000 for her culinary and pastry arts degrees, but stresses that was in the mid-‘90s and prices have vastly increased since then. She says she would make the same decision again, but that culinary school isn’t the best choice for everyone.

“I don’t think it’s necessary for people to go to culinary school, but I am an advocate of it if you can. It’s very expensive. I don’t think it’s something that’s necessary, but I think it’s helpful in getting practice and learning about basic skills, which are the building blocks and foundations of anything you do.”

Holmes said that despite the increasing cost of getting a culinary degree, he thinks his education has already paid for itself.

“It would take me between another two to three years to [be an executive chef], and I would make about 50 percent what I make right now in that time. I would have no foundation for any sort of negotiation to say, here’s the education I’ve been able to get, this is the experience that I have a result of that, this is the experience I got in addition to that and this is how much I’m worth.”

His diver scallops eventually ended up pan-seared and accompanied by stone-ground polenta, roasted asparagus and a tomato, caper and olive relish.

“I wanted to be a chef since I was 4 and I just never had the gumption to do it. Finally I was like, ‘I’m sick of being sick and tired. I’m going to be a chef,’” he said. “Now I’m just tired all the time, but I’m happy.”

This story was published via The Medill News Service on June 2, 2008. It was written for a class while Molly was attending Northwestern’s Medill School of Journalism.

Americans are gluttons for gluten. Found naturally in wheat, barley and rye, we use the grain protein in everything from pet food to toothpaste to soy sauce. Even communion wafers.

And 1 percent of the population can’t eat it.

According to the University of Chicago Celiac Disease Center, more than 3 million Americans suffer from Celiac disease – an autoimmune disorder that results in gluten intolerance. The only treatment is life-long avoidance of wheat, barley or any substances that contain it.

Margot Chapman is co-owner of Lincoln Park’s Swirlz Cupcakes, a subsidiary of Four Unlikely Friends LLC. She was diagnosed with Celiac disease five years ago and insisted that gluten-free cupcakes be on the Swirlz menu every day.

Chapman also owns a marketing company and has developed products for Fortune 500 companies, including Kellog Co. and Pepsico Inc.’s Quaker Oats and Frito-Lay.

“I’ve done a lot of work in grains,” she said. “I’m called the ‘Queen of Grains.’ I’ve developed grain products for cereal and bread and cookies and cake.” She says she was shocked when she was diagnosed as gluten-intolerant.

Swirlz’s gluten-free goodies cost the same as the traditional options – $3 per cupcake – and Chapman said they’ve been a success because the bakery uses a special blend of flours to create a taste and texture similar to a normal cupcake.

“Wheat, which is what you would normally bake with, has a lot of elasticity, which makes bread and cookies taste yummy. So when you take it out of a product, and you try to create something that tastes yummy and delicious, it’s really a challenge,” she said. “It’s not just a matter of taking something out, it’s what do you put in to create the taste and texture that doesn’t taste fringe and odd and strange.”

The Nielson Co. reports that revenues from items labeled gluten-free have soared almost 20 percent in the past year to $1.7 billion from $1.4 billion in May 2007. Sales have increased 74 percent compared with 2004. Some items, like gluten-free gum and pet food, only entered the market in 2008.

The first mainstream food supplier to embrace gluten-free products was General Mills Inc. Last month, the world’s sixth-largest food company announced that its Rice Chex breakfast cereal is now gluten-free.

Conventional grocery stores are stocking more gluten-free products, though truly tasty options can be elusive. Many Celiac sufferers cited Whole Foods Market IP LP and Trader Joe’s Co. as putting more options on their plates, but gluten-free food continues to be more expensive.

“It takes a bit of doing to learn what’s out there, and then it takes awhile to sample all the different kinds, but there’s much more today than there was 20 years ago,” said Claudia Franz, president of the Celiac Sprue Association of Greater Chicago.

So with grain prices still rising, does it make fiscal sense to adopt a gluten-free diet?

Maybe. As grain becomes more expensive, so will its dependent products. The United States Department of Agriculture reported that the April 2008 average price of U.S. wheat was $371 per metric ton, double the $180 per metric ton average wheat price in April 2007.

Gluten is an element in thousands of frequently used food products, so paring it from your diet could help cut costs.

And yet, gluten-free items remain more costly than wheat products and show little sign of dropping in price, despite growing interest and increasing need.

For example, the number of people eating gluten-free diets may be larger than the number of Celiac sufferers. Because of the intensity of the intolerance, separate ovens, toasters and other appliances can be needed to reduce contamination. So, many families of sufferers lead gluten-less lives as well.

Chapman said the bakery has been hit hard by rising egg and butter prices, but the cost of baking with wheat and their special blend of gluten-free flours has remained about the same.

“They’re probably comparable given the price of wheat and given the price of buying a number of ingredients to blend them into one thing,” she said.
Franz expressed hope and doubt that the price of gluten-free food will drop dramatically.

“As more and more people here are diagnosed [with Celiac], I think the volume of purchases will go up, and then I would hope food prices would come down. You can go as high as $8 for a loaf of gluten-free bread, depending on what you buy,” Franz said. “I don’t see it coming down in the near future, but I hope it does before I die.”

This story was published via The Medill News Service on May 13, 2008. It was written for a class while Molly was attending Northwestern’s Medill School of Journalism.

Commercials for sports drinks, apparel and supplements celebrate the price athletes pay to achieve superior fitness levels. But as meat and dairy costs escalate, what’s the price athletes pay… for food?

Joel Belding, a Northwestern University football player, spends about $5,400 on food per year; the United States Department of Agriculture reported the average American spent $3,760 on food in 2007. A senior offensive lineman, Belding eats a carefully balanced diet that is guided by the team nutritionist.

“When I go to the store I always try to find the cheapest stuff,” he said. “But even in the last two years… I’ve noticed that things like lunch meat have gone up quite a bit in price. It seems a little out of control.”

College and professional athletes represent a small segment of the population, but one that’s hit much harder by rising food prices.

The U.S. Consumer Price Index released Wednesday showed that food prices in April were almost 1 percent higher than in March, and more than 5 percent higher than in April 2007.

The products that have seen the biggest increase in cost are fats and oils – up 12 percent from a year ago. The cost of fruits, vegetables and dairy products have also increased dramatically.

Athletes take in more calories per day than the typical American, and they consume products that tend to be costlier, like proteins, extra calcium and fresh produce.

“On the Chicago Blackhawks training table, we have 100 percent grass-fed beef. Whenever we can, we feed them the premium proteins, because protein is so very important to the athletes’ diet. But it also tends to be very expensive,” said Julie Burns, M.S. R.D. C.C.N., owner of Eat Like the Pros LLC, a Chicagoland meal delivery and nutrition consulting service.

Burns is the team nutritionist for the Chicago Blackhawks, the Chicago White Sox and several Olympic athletes. She has previously consulted with the Chicago Bears, the Chicago Bulls and varsity athletes from Northwestern University.

“The ideal diet would be a really clean diet, none of the added hormones, pesticides, chemicals,” she said. “It really helps them do their job better.”

Victoria Shanta Retelny, R.D. L.D., is the owner of Chicago-based Living Well Communications, a nutrition consulting practice. She estimated that if the typical grocery bill for one person is $80, similar to the USDA’s figures, an athlete would pay about $140, or not quite double.

“If you’re looking for organic produce and grass-fed cattle, you have to go to specialty stores to get many of those types of foods, so you may look at higher costs,” she said.

Because protein helps build muscles, nutritionists and dietitians recommend it, particularly in its premium-priced, organic form. Some also highlight the importance of textured vegetable protein or soy products, such as Boca® Burgers.

None of which is cheap.

The Chicago Blackhawks’ 22 players travel for some of their games. Eating on the road can be pricey – the team spends a minimum of $3,916 on food during two days of traveling.

That means 22 athletes are spending in two days what the average American spends in one year for food.

The athletes are hungry for wins, but they may also be just hungry. The typical American is advised to eat about 2,000 calories a day. Burns said some Blackhawks players are advised to eat 3,000 calories, while others down 5,000 or more per day. Retelny estimated that pro athletes’ diets can go as high as 6,000 calories per day.

An athlete’s recommended intake ranges by sport, position, gender and training needs. Males generally consume more calories than females because they have more muscle mass.

Level of activity is also a factor – a goalie usually burns fewer calories than a speedy forward. Rookies and college athletes are advised to pack on the pounds because they tend to be smaller and lighter than the older, pro competitors.

“Typically a college athlete is going to take in between 3,000 and 5,000 calories per day,” Retelny said.

And what is double the average person’s intake is peanuts to athletes.

“Lance Armstrong used to take in 10,000 calories a day,” Retelny said, referring to the legendary Tour de France regimens for super-elite cyclists.

Wrestlers often have a different relationship to food than other athletes because they have to make weight. But even lightweight wrestlers consume at least a third more calories per day than the typical American.

“I would say if they’re in the middle of their season and practicing, they need at least 3,000 calories a day,” said Leo Kocher, head wrestling coach and associate professor of physical education and athletics at the University of Chicago. “When I say 3,000 calories I’m thinking the minimum for a small guy, and when you’re talking heavyweights, I imagine you’re at 4,500 to 5,000 calories,” Kocher added.

Vitamins, supplements and sports drinks also rack up costs. “It’s hard to predict, but… [athletes spend] probably $35 or $40 a week just on drinks, because they require more fluid than the average person,” Retelny said.

So how can an athlete cut costs?

“If you’re shopping locally and going to your local farmer and trying to look at your local butcher and possibly befriending some of these people, you can get better prices. There is such a thing as bargaining for your food,” Retelny said.

Emptying your wallet to fill your belly is a problem not likely to be solved for athletes or the world’s population. Increasing food prices make it harder to eat quality proteins and fresh produce. Are strict, high-maintenance eating plans really necessary?

“I think there’s more variance in human bodies and what works best for people than even the nutritionists and dietitians and exercise physiologists realize,” Kocher said.

And that’s something to chew on.

This story was published via The Medill News Service on April 28, 2008. It was written for a class while Molly was attending Northwestern’s Medill School of Journalism.

Loaves and popovers grow lofty and puffy because yeast feeds on sugar and releases carbon dioxide. These rising breads are causing something else to rise — the popularity of food books.

In the past decade, interest in food books has skyrocketed for Chicago’s publishers, libraries and bookstores.

“If an editor wants to make a little extra cash, a good way to do that is to publish a food book,” said Susan Bielstein, executive editor at the University of Chicago Press. “I think people love to eat. I think people are interested, they want to know more about what they put in their mouths,” she added.

Nielsen BookScan, part of Nielsen Book Services Ltd., counts the total units of books sold yearly. In 2007, there were over 13.9 billion “cooking/entertaining” books sold nationwide, up 12 percent from 12.5 billion in 2004. The highest year recorded was 2006, when approximately 15 billion food books left the shelves.

“It’s a hot topic. Everybody loves cooking books,” said Katherine Behan, a manager at Myopic Books in Wicker Park, which stocks 1,333 food books.

Food Network Television, owned by Scripps Networks LLC, premiered in 1997, and the arrival of celebrity chefs like Rachael Ray, Emeril Lagasse and Anthony Bourdain has undoubtedly fanned the flames of Americans’ interest in food.

The oft-made crossover from recipe books to merchandise, spices, kitchenware and so on has fostered a whole food culture. We’ve become a nation of noshers with serious loyalties.

Consequently, bread dough is leading to money dough. Food Network’s Rachael Ray and Paula Deen were credited in the 2007 Books-A-Million Inc. annual report with dominating sales in the cookbook category.

R.R. Bowker LLC tracks ISBNs and bibliographic information. According to its Books in Print Database, 3,044 new cooking titles were released in 2007, up 53 percent from 2002, which was the lowest year in a decade. The number of new cooking titles is up 27 compared with 1996.

Much like describing a flavor or scent, the category of food books is hard to define. It might include recipe books, celebrity chef biographies and memoirs, gastronomy, environmentally sensitive cuisine, wine, food travel books, or food histories like those published by the University of Chicago Press.

It’s easier to make a soufflé than get an accurate estimate of food book revenues. Most booksellers said they do not record sales by genre. The number of food titles stocked in their stores, however, has shown a definite rise.

“Cookbooks is a very strong category for us,” said Carolyn Brown, director of Corporate Communications at Barnes & Noble Inc.

Jeffrey Burakowski, general manager at Chicago’s only Books-A-Million store, said he’s seen a dramatic increase in attention paid to food books, particularly in the way the section is organized.

“I’ve been in the book business for 13 or 14 years,” he said, “and food writing was never something we had a specific category for” until now. He also noted the presence of familiar faces. “The thing with celebrity chefs is that we always had the celebrities right next to people that didn’t really have a name, and now we have a specific section just for chefs… as they have their own shows they start writing not so much recipes, but more food stories,” he said.

Bielstein points out that stories about food are an important part of society: “You can get the pulse of an entire civilization by looking at its food,” she said. The University of Chicago Press has between 10 and 15 food books in print now; a decade ago they had about five.

Food-oriented magazines are gaining popularity as well. Condé Nast Publications’ Bon Appétit showed a 19 percent increase in circulation in Illinois from Dec. 1997 to Dec. 2007, to 57,742 copies sold from 48,497. Its national circulation jumped 28 percent during the same period.

Gourmet, also owned by Condé Nast, has seen its circulation rise to 957,136 copies sold nationwide in 2007, up 7 percent from 891,797 in 1998.

The Publishers Information Bureau, part of Magazine Publishers of America, reports on magazine and advertising trends. In the first quarter of 2008, advertising categorized as “food and food products” increased 29 percent, to $568 million from $440 million in the year-earlier period.

The PIB also reported that in 2006, 12 new magazines in the epicurean category were launched. In 2007, food and nutrition was the fifth-most popular subject category in magazines. The number of editorial pages devoted to food and nutrition was over 14,000, up 7.4 percent from the year before. (Top categories included celebrity, apparel and home management.)

Borders Inc., which currently stocks about 2,000 food books per store, is in the process of spicing up its food sections with concept stores called “Cooking Destinations.” Fourteen concept stores will be built in 2008, none in Chicago.

Kolleen O’Meara, a representative for Borders, said the concept “combines cooking books, DVDs and products such as recipe holders; eventually we’ll have cooking utensils, hot pads, things like that, as well as Borders TV which runs cooking specials, tips and interviews with celebrity chefs.”

Last month for the first time, The Newberry Library hosted a food-oriented book seminar. It plans to do more such events in the future.

“Part of [this popularity] is things like Food Network and frankly, Martha Stewart and that whole domestic movement,” said Riva Feshbach, Newberry Library’s exhibits manager, who is seeing more interest in food books.

Gapers Block, a local events and blogging Web site, launched its food blog a year ago. Drive-Thru is dedicated to the Chicago food scene and includes hot trends, restaurant openings and closings and user comments. It’s the site’s most popular blog.

“Because there was so much interest in Chicago restaurants and dining out and Chicago has such a dynamic food scene in general, between the restaurants and ethnic groceries, specialty food stores etc., there was enough to cover that we could devote an entire section to it,” said Editor and Publisher Andrew Huff. Drive-Thru generates about 5,000 visits per week.

“It doesn’t seem like it’s a trend that’s going to slow down any time soon,” Huff said.

After all, eating is as American as apple pie.

This story was published via The Medill News Service on January 16, 2008. It was written for a class while Molly was attending Northwestern’s Medill School of Journalism.

Jatropha curcas isn’t much to look at. It’s a scrubby, shrubby tree generally used as a hedge to protect food crops. It repels animals and if ingested, can make humans sick.

But Archer Daniels Midland Co. sees value in the plant’s seeds, which contain oil that can be converted to biodiesel fuel. The company announced a partnership last week with Bayer CropScience AG and Daimler AG to explore the plant’s potential.

“I think ADM has made a lot of transformations over the last few years. They’ve really taken a lot of steps to invest in ethanol, renewable energy… and they’re trying to answer America’s energy problems,” said Ann Gilpin, equity analyst at Morningstar Inc.

But Gilpin said jatropha is unlikely to significantly impact the biodiesel industry or ADM’s bottom line in the near future.

Perhaps jatropha’s biggest selling point is it can grow in poor soil, so producing the weed would not necessarily take away from other farmland. This could make it easier for farmers to cash in if jatropha were to catch on.

“It’s technically considered a weed in most parts of the world,” said William Manley, chairman and CEO of ALTEN Industries Inc., a Baltimore-based alternative energy development company. “It is a perennial. It grows in crummy conditions in semi-arid regions. It only requires about 600 mm of rainfall to bloom and generate seed. It’s inedible, and it will grow on degraded farmland.”

ALTEN is currently in negotiations for a contract to grow jatropha in Brazil.

European companies, most notably D1 Oils PLC in the U.K., have been growing plantations of jatropha for years. Japanese fighter pilots even used it in World War II when oil for their engines was in low supply.

Proponents of the weed tout its potential positive impacts on the global economy. Jatropha grows year-round and the trees – which can live up to 30 years – are not damaged during oil production.

Manley said ADM’s entrance into the jatropha business makes sense following a similar move by other energy companies. In 2006, BP PLC began a $9.4 million project in India to further explore the plant’s potential.

But some analysts say the weed that is putting down roots in the alternative energy industry might not deliver.

“My prediction is that it’s not going to have really wide-scale success. It’s not really going to catch on in areas that are used to profitable agriculture production,” said Elaine Kub, commodity market analyst for DTN.

“It may have more success in developing countries that can’t afford really to be buying expensive edible oils and using them for biodiesel,” she added.

Jatropha is harvested by hand and requires different treatment than other biofuels.

“It can’t be handled in the same tankers, it’s difficult to clean out, it’s just a different product,” Kub said. “It’s not a perfect substitute for other oils that are usually used for biodiesel now.”

Gilpin also expressed some doubts. “The potential energy here is enormous,” she said. “But, ADM has their hand in just about everything. They’re active in a million projects, and I don’t think this one will affect ADM strongly.”

This story was published via The Medill News Service on January 22, 2008. It was written for a class while Molly was attending Northwestern’s Medill School of Journalism.

Batavia-based Fuel Tech Inc. announced Tuesday a plan to demonstrate and test, in China, a chemical intended to boost efficiency and reduce toxic emissions in coal-fired plants.

The company stated that its technology, called Fuel Chem, uses computerized models to spray a chemical mix into the furnace or boiler of a coal plant as the coal burns. The chemical’s main purpose is to reduce slag formations.

Slag is the key to running an efficient coal plant, analysts say. As coal burns, it produces ash, which settles in the boiler and hardens, reducing the effectiveness of the operation. The company claims the Fuel Chem cocktail also enables plants to burn a broader spectrum of coal, along with reducing toxic emissions.

“This isn’t so much about the pollution control,” John Kearney, a stock analyst at Morningstar Inc., said. “There are some pollution benefits to installing this, but Fuel Chem is more about the efficiency of the plant.”

There are approximately 3,000 to 4,000 coal plants in China, compared with about 1,500 in the U.S. Development and renovation are continuing at such a rapid rate that some experts estimate China is opening two new plants a week.

Richard Hoss, an equity analyst at Roth Capital Partners LLC, said, “This is the initial penetration. It’s symbolic.”

“This is a big deal,” Kearney agreed, “because China generates an estimated 70 percent of their energy from coal. It’s a big opportunity for Fuel Tech to just expand their market and market size.”

But Jesse Herrick, a research analyst at Merriman Curhan Ford & Co., is a dissenting voice. “I am somewhat concerned about patent protection,” he said.
“China is well-known for being able to reverse engineer things and duplicate products. There’s definitely a concern on that front when entering the Chinese market with a new technology.”

Analysts feel Fuel Tech may have a competitive edge because of its partnership with ITOCHU Hong Kong Ltd. – a subsidiary of ITOCHU Corp., a Fortune Global 500 company – which sells products and services to combustion unit customers in China.

“There are some other players out there,” Kearney said, “but Fuel Tech has the most clients at this point. They’re seen as kind of a market leader in this area for the time being.”

Herrick expressed concern about two competitors – GE BETZ, a unit of General Electric Co., and Environmental Energy Services Inc. He said: “From the channel checks that I have done, it appears that you can get this product for about half the price and just as effective. And in addition, less intrusive when dealing with a coal-fired boiler. Those were some of the primary drivers for my downgrade” from buy to sell.

Fuel Tech’s revenues dropped 24 percent to $15.2 million in the quarter ended Sept. 30 from $20.2 million in the prior-year period. The stock is down 35 percent from last year at this time, to $16.36 from $25.51.

This comes after a big year for the company. Fuel Tech was featured on the cover of Fortune Magazine’s July/August issue after its revenue jumped from $53 million in 2005 to $75 million in 2006, a boost of 42 percent. The company’s net income also increased, by 11 percent, to $7.5 million from $6.8 million.

Fuel Tech stock remained steady Tuesday, despite the down market, and closed at $16.36, down 10 cents.

This story was published via The Medill News Service on February 14, 2008. It was written for a class while Molly was attending Northwestern’s Medill School of Journalism.

After a first year burdened by merger costs, Chicago-based Integrys Energy Group Inc. gets good marks from analysts on a solid balance sheet and high synergies of the merger partners.

Next week marks the one-year anniversary of the marriage between WPS Resources Corp. of Green Bay and Peoples Energy Corp. of Chicago to form Integrys Energy. After three quarters of earnings deemed shaky by analysts, they expect a good fourth-quarter earnings report on Tuesday. They estimate $2.56 per diluted share; there’s no comparable year-earlier figure.

“There was dilution, especially the first year, from the merger, but now going forward, it seems the biggest risk is over” and each company should benefit from having merged, said Maurice May, an equity analyst with Power Insights/Soleil Securities Group Inc.

Integrys is a holding company for natural gas and electric utility companies, including North Shore Gas Co. and the Peoples Gas Light & Coke Co. Both serve the Chicago area. Integrys’ subsidiaries have more than 1.8 billion customers in four Midwestern states.

The merger gave Integrys assets of about $10.3 billion. With the stock trading Thursday at $48.36, the current market capitalization is $3.7 billion.

In its 2007 annual report to the SEC, Integrys wrote, “The estimated total cost of accomplishing the merger and achieving synergies and cost savings is approximately $186 million in transaction and integration costs (excluding internal labor costs), most of which will be incurred through 2010.”

On the other hand, the joining of WPS Resources and Peoples Energy was expected to deliver annual synergies of $94 million over a five-year time period.

“They have a very good balance sheet and I would say the financial health of Integrys overall is good,” May said. “They actually have an AA- bond rating at their core utility in Wisconsin. I don’t know if you know anything about bond ratings, but AA- is very good.”

Before the merger, Peoples Energy was struggling with erosion in the gas distribution segment and posted a 2006 loss of $17.6 million, a dramatic drop from a 2005 profit of $78.1 million. The company also had a $107.3 million settlement payoff that included $100 million in customer refunds. Integrys reported at the time that its natural gas utilities, Peoples Gas and North Shore Gas, had not upped its delivery rates in 11 years, despite rising operating costs.

At the same time, WPS Resources was in the black, but profits were meager in 2006, at $155.8 billion, down 1 percent, from $157.4 billion. The company said acquisitions in Michigan and Minnesota were responsible for the decline.

On Thursday, natural gas delivery rates for customers of Peoples Gas and North Shore Gas were raised. This is the first time the base rate has been raised for their Illinois customers since 1995.

“Utilities have two rates, an energy rate and a base rate,” May said. “The base rate is what was at issue with the general rate case. Shareholders only make money on the base rates.”

Analysts say the rate increase is related to lower earnings and a need to update expenses, along with “decoupling” charges.

Decoupling is a company’s act of separating the link between volumes of energy sold and the earnings the company makes. Ordinarily, there is a direct correlation, but decoupling provides a cushion for utility companies, particularly when they explore other forms of energy.

“If we are going to make a serious effort [towards] conservation, you can’t ask that agent of conservation – the utility companies who actually do the conservation – to kill themselves in the process,” May said.

The decoupling process, also known as volume balancing adjustment, is proceeding on a four-year trial basis.

This story was published via The Medill News Service on February 19, 2008. It was written for a class while Molly was attending Northwestern’s Medill School of Journalism.

Two U.S. pipeline companies announced Tuesday their plans to assess the feasibility of constructing an ethanol pipeline through the Midwest.

If built, the pipeline would the first one totally dedicated to transporting ethanol in the U.S.

According to a press release, Oklahoma-based Magellan Midstream Partners LP and Pennsylvania-based Buckeye Partners LP have partnered to explore creating a 1,700-mile pipeline. The line would move ethanol from plants in Illinois, Iowa, Minnesota and South Dakota to major cities like Pittsburgh, Philadelphia and New York City. The project is estimated to cost more than $3 billion.

The American Coalition for Ethanol’s 2007 report lists Illinois as the second largest producer of ethanol in the U.S., at 317 million gallons per year. Corn grown in Illinois is used to produce 40 percent of the ethanol consumed in the U.S., according to the Illinois Corn Growers Association.

Nearly one-third of all gasoline in the U.S. already contains low levels of ethanol – usually between 5.7 percent and 10 percent. The Illinois Corn Growers Association reports that 95 percent of the gasoline sold in the Chicago area contains 10 percent ethanol.

However, high levels of ethanol cannot be piped through existing gasoline lines without damaging them.

“There are hundreds of thousands of miles of pipelines in the United States. Most of the liquid pipelines will run a mix of fuels, they might run jet fuel for awhile, then they’d run gasoline for awhile, then they could run crude oil for awhile,” Ted Huck, vice president of sales and marketing for Pennsylvania-based engineering firm MATCOR Inc. said.

However, once ethanol has been pushed through existing pipelines, they can’t be shared with other refined products.

“In pipelines today, you can ship different materials through with plugs that separate the shipments. But with ethanol, because it absorbs water and that sort of thing, it’s really difficult to use a non-dedicated pipeline,” John Urbanchuk, the director of expert-resources firm LECG LLC, said.

John Cusick, a research analyst at Oppenheimer & Co. emphasized: “It’s a corrosive agent, so it breaks down the pipelines themselves when it mixes in. It can’t physically be put into a pipeline because it would erode the pipeline away.”

Magellan and Buckeye may be years away from construction, simply because not much is known about transporting ethanol through pipelines. Studies on the technical issues and economic impact of creating an ethanol pipeline are ongoing; no ethanol pipelines exist in the U.S., though Brazil is in the process of constructing one.

“With the recent increase in renewable fuel standards, there’s a lot of ethanol and a lot of opportunities for these companies to transport the fuel, so many are looking at this, or at least hint that they are,” Robert White, director of operations for the Omaha, Neb.-based Ethanol Promotion and Information Council, said.

Cusick said Houston-based Kinder Morgan Inc. announced plans to test an ethanol pipeline in Florida this year. “Obviously everybody thinks that there’s going to be more ethanol produced… I think once either Kinder or Magellan or somebody will come up with a pipeline that actually works, you’d see more pipelines being built and that’s how it would work out.”

Changing the way ethanol is transported may have more of an effect on consumer pocketbooks than adopting alternate fuels or even falling oil prices.

“If you looked at something in Illinois or maybe Iowa, sending it to the East Coast by freight is anywhere between 16 and 18 cents a gallon. If you take into consideration a refined product traveling the same distance, it would probably be under a nickel. So if you could get ethanol from Illinois to the East Coast for twelve cents a gallon cheaper than you can today, obviously a lot would change in the world, and the interest in ethanol [would go up],” White said.

Urbanchuk agreed, “The cost of shipping ethanol would be about the same as it is to ship gasoline through a pipeline.”

Ethanol is mostly moved now by rail and trucks, which are costly and time-consuming methods of transportation. While a pipeline should help in the cost of distributing ethanol – and presumably in the cost of consuming it – it could also take away jobs from the rail and trucking industry, particularly in the Midwest.

Shorty Whittington, first vice chairman of the American Trucking Association and owner of Integrity Biofuels, said: “You’re right in that, but it’s a situation where the congestion in the trucking and rail, well, you hate to lose it. But what are we going to do with a third more trucks and that many more trains in the next ten years? The infrastructure that we’re in is pretty tough.”

Most experts admit there’s something of a chicken-and-the-egg effect as companies consider shipping ethanol. The production of ethanol isn’t high enough today to create a desperate need for pipelines, but without a pipeline infrastructure in place, companies are hesitant to produce more ethanol.

One motivator is the Energy Independence and Security Act of 2007, which President Bush signed in December. The law requires that American fuel producers use 36 billion gallons of renewable fuels by 2022, with is more than five times what is currently used.

“That’s going to mean we’re going to have to ship that stuff around,” Urbanchuk said.

But the biggest challenge to Magellan and Buckeye now may not be moving products through an ethanol pipeline, but moving funding through the federal government pipeline.

“They have reached out to Congress and said, ‘Some of this has merit, but we need some support and we need to know how much that support’s going to be, because we need to make business decisions on our end,’” White said. “[This $3 billion project is] a substantial investment that you have to recapitalize somehow.”

The companies’ press release repeatedly stresses the importance of government support, “Congressional support and assistance is necessary for a project of this nature given the changing federal policies associated with renewable fuels.”

“Magellan and Buckeye have to factor in the huge political risk that if we stop subsidizing ethanol as a country, that $3 billion investment could become worthless quickly,” Huck said.

The Energy Act included a provision requiring that the government begin doing its own feasibility studies on ethanol-dedicated pipelines. The studies are to be released around this time next year.

This story was published in The Daily Herald on March 6, 2008. It was written for a class while Molly was attending Northwestern’s Medill School of Journalism.

Fuel Tech Inc. reported Wednesday its earnings ballooned by 259 percent in the quarter ended Dec. 31, beating Wall Street’s expectations on record sales of the company’s air pollution control technology.

However, Fuel Tech’s 2008 revenue estimate came in lower than analysts expected, and its stock fell 58 cents, or about 3 percent, to $18.99 in Nasdaq Stock Market composite trading.

Batavia-based Fuel Tech, the biggest U.S. maker of pollution controls for power plants, logged a record net income of $5.2 million, or 21 cents per diluted share, up from $1.5 million, or 6 cents per diluted share, in the year-earlier period. Analysts estimated 16 cents per diluted share.

Quarterly revenues reached a record $32.6 million, an increase of 80 percent, compared with $18.1 million in the year-earlier period.

“If you want to look for a downside, it has to do with investor expectations,” said Dan Mannes, vice president and senior research analyst at Avondale Partners LLC. “I think this is a company that has a lot of expectations surrounding it because of the sector they’re in and because of the quality of their products.”

Fuel Tech also announced Wednesday $6.7 million of new orders of its technology. Because of its presence in the global market, particularly Mexico, China and India, the company and many analysts expect steady growth.

“We’re operating in about 30 countries,” said President and CEO John Norris in an interview. “The Mexican market is extraordinarily vibrant for us right now.”

Morningstar Inc. equity analyst John Kearney said the company’s increases aren’t enough. “They’ve really got to ratchet this growth up. Ten to 16 percent top line growth is good for a lot of companies, but a company this young with this much growth potential, it’s not going to cut it for investors.”

The company predicted 2008 sales of between $88 million and $93 million. Analysts were expecting $108.2 million.

“I think they were overly conservative with their guidance for next year,” Kearney said. “I think last year they came out a little more optimistic and they had to kind of temper those expectations. I think they’re too low. I think you’re going to see them come out and beat those numbers for the full year.”