Posts Tagged ‘corn’

Nigel Hunt of Reuters reports that

Corn prices rose to record highs on Monday and looked set to climb further as torrential rains threatened to reduce further U.S. crop prospects in a market already facing tight supplies and surging demand.

Strong demand for corn from U.S. biofuel producers has contributed to supply tightness in the corn market. The U.S. Department of Agriculture has forecast about a third of this year’s crop will be consumed by the biofuel sector.

“I am still very bullish. I think $7, $8, $9 corn is well within reach,” said Commerzbank analyst Edward Hands.

Unfortunately, the combination of a foolish corn ethanol program with rising gas prices and rising transportation costs are all conspiring to drive up the price of food. With the additional effects of the recent heavy storms and rain in the Midwest, including flooding in some areas and frequent tornadoes, corn prices are skyrocketing. One simple action that should be taken immediately is to halt all corn ethanol subsidies and programs, so that food and fuel are no longer in competition with each other.

Original text copyrighted © 2008 James K. Bashkin

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Addendum. Devastated US corn crop sends ethanol producer shares into freefall.” The Associated Press reported the following financial news:

The values of ethanol producers hemorrhaged Thursday as the price of their key feedstock, corn, climbed to record levels because U.S. floods have devasted this year’s crop.

“In the last 10 days the world has changed in the corn market with massive flooding causing irreparable damage to this year’s crop and pushing corn prices up $1 over this time frame,” Citi Investment Research analyst David C. Driscoll wrote in a client note.

“As a result of this unprecedented weather event which has happened only twice in the last 25 years, ethanol margins have plummeted over the same ten day time span with small and mid size ethanol producers now running at substantial losses against cash costs.”

He expects such small and mid-sized producers to halt operations.

Unfortunately, these financial and farming problems will increase food prices in the near term, but they may help lower food prices in future growing seasons, as long as the corn ethanol producers stay shut down. Repeal of the tax credits for corn ethanol would help keep corn ethanol from once again driving food prices up.

Original text copyrighted © 2008 James K. Bashkin

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These comments are my analysis and discussion of an article on various sides of the “corn ethanol story” published by Joel Achenbach in the Washington Post, with farmers telling us they can’t survive without the subsidies. I guess they’ll inherit the earth when the rest of us have no water to drink. The fact that the dust bowl is likely to be re-created doesn’t seem to bother them, so get ready, California, for a big influx of foreigners from the Midwest. Click the “read more” link below to see the article.

The comments on the story, found on the Washington Post website, are most telling, with some decrying “environmentalists who are never happy.” Well, I don’t see a lot to be happy about when tax dollars are being spent to subsidize a senseless and wasteful corn-ethanol program that pollutes and wastes our fresh water while having no impact on our foreign oil dependence. I have documented much about the problems of corn ethanol on this site. I don’t blame the farmers for taking the subsidies: heck, this is America, where socialism is a crime unless it bails out good farmin’ folk (or big business). Using public funds to save lives through health care, or to save the environment through any number of approaches (mass transit, anyone?), is clearly viewed as evil by many. It is, however, our “energy policies” that are flawed- they certainly have nothing to do with energy.

Corn is food, and will never compete successfully as an ethanol producer unless its non-food parts are added to cellulosic ethanol feedstocks in future biomass-to-ethanol plants. Wasting money on corn-ethanol just delays research on sensible biofuels and pollutes the fresh water that is so short in many parts of the US and the world.

Why is it that everyone is up in arms about chemical companies, oil companies, power companies or mining companies that pollute the environment, but polluting is no problem at all if done by those great family farmers whom we all love so much (and their large corporate cousins)?

Of course, as pointed out in one of the comments to the Washington Post story, ethanol contains about half the available energy that gasoline contains, so you have to burn twice as much ethanol as gas to go the same distance at the same speed.

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© James K. Bashkin, 2007

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I couldn’t accept a critical comment because (a) wordpress insisted on treating it as spam and (b) they were right: it was linked to what is apparently a spam site (it tried to download software onto my computer without asking my permission). However, I welcome disagreement, so I put the entire, unedited criticism in the comments section to the post “An Unfortunate Truth about Bioethanol”, though under my own name. I also added some responses.

Not everything about corn-ethanol is bad. Unfortunately, as far as I can tell, too much is bad to make it a good idea. See the following EPA report on formaldehyde if you have any questions about how desirable it is as a tail-pipe gas (it has been recognized as the cause of major health problems by the EPA since the 1980s).

© James K. Bashkin, 2007

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