Posts Tagged ‘food prices’


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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What is a plug-in hybrid? It is a car that runs on electricity via a battery that you can charge by plugging into a regular electrical outlet. These cars, being hybrids, also have gas tanks that can be used to power the car and recharge the battery, giving you what some might call the best of all world’s (assuming mass transit, bicycling or walking aren’t options). Best of all would be to burn no liquid fuel, but plug-in hybrids allow us to reach, or closely approach, this ideal in many cases.

What is different about plug-in hybrids? The plug! Current commercial hybrid cars use batteries, but they inconveniently keep a barrier between you and the electric company. You have to burn gasoline (petrol) to charge the battery.

How can you buy a plug-in hybrid? You can buy a hybrid car “off the shelf” and have it converted to a plug-in hybrid. This service is available in the US, the UK and elsewhere. Plug-in hybrids may be available directly from Toyota by 2010. For more information on plug-in hybrid cars, the following sites are very valuable: Plug-in Partners, Plug-in America, Hybrids Plus (a manufacturer of plug-in hybrids in the US). See also the DVD “Who Killed the Electric Car?”, read the book “Plug-in Hybrids: the cars that will recharge America”, and read the blog “plugs and cars”. The site “What Green Car?” provides information about plug-in hybrids for consumers in the U.K.

What are the running costs of plug-in hybrids? Estimates suggest that the transportation costs are equivalent to gasoline at $1.00/gallon.

Don’t forget that purely electric cars and trucks and buses are also available in the US, the UK, and elsewhere. For example, in the US, Tesla Motors, Volt and Phoenix Motor cars offer a range from trucks to sports cars. I wrote a recent, short post on very small and inexpensive electric cars being made for India.

I’d like to hear about other plug-in hybrid and electric car options in the US and around the world, and people’s reaction to (a) the low cost of plug-in hybrids coupled with the security of a gas tank if you need it, vs. (b) purely electric cars, which now have long range driving ability as well as high power (in some cases).

Don’t forget that you can couple electric cars or plug-in hybrids with solar and/or wind powered electric systems for your home or work-place to minimize or eliminate the use of liquid hydrocarbon fuels like gasoline/petrol, ethanol, etc. You can even run your home off your car battery!

© James K. Bashkin, 2008

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As reported in the New York Times on Feb 8, 2008 and discussed by Douglas Schiller at AlternativeEnergy.com, two studies have reached the conclusion given in the title. US demand for biofuels from food sources is driving up food prices throughout the world.

A key distinction here is “from food”. We may still have the option of using waste cooking vegetable oil and other waste products to produce biofuels (for example, to make biodiesel) without harming food prices or the environment. Solutions to the problems that do not require liquid fuels, including electric cars, are looking like the best answer over the long term, however.

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For another (better) overview of the reports that were released yesterday from a number of Universities and The Nature Conservancy, see here.

© James K. Bashkin, 2008

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With thanks to George L. in St. Louis for the heads up, here is what The Economist has to say (in regard to US corn-ethanol efforts):

“Everyone seems to think that ethanol is a good way to make cars greener. Everyone is wrong”

The article does not dismiss all bioenergy, and it reports on new research and development that may provide economically-viable bioenergy supplies. The discussion of these potential new approaches is supportive and hopeful.

However, the article dismantles myths about corn-ethanol as a fuel. These include the matter, well-known by technologists but seemingly unknown to politicians or the public, that ethanol is a lousy fuel for many reasons. Not the least is the “hygroscopic” nature of ethanol- its property of absorbing water from the atmosphere. Automobile fuel with significant water content is bad for combustion efficiency.

It is time we realized that “natural” is not synonymous with “environmentally friendly”, or even “harmless”. It is time we stopped allowing senseless government subsidies of environmentally-wasteful corn ethanol programs that are driving up the cost of nearly all food, everywhere, in the US and around the world… without doing a single thing to solve any energy problem.

If you want to read more about the harmful effects on “normal people” of increased food prices, just see”Biofuelled: Grain prices go the way of the oil prices,” from The Economist print edition, or online at the link. The fact that demand for grain is exceeding supplies is explained in this article:

“The culprit is the growing use of grains to make biofuels, such as ethanol. … Ethanol distilleries (in the USA) now consume 1/5 of the Nation’s corn.”

But how can this be? Bioethanol is all natural. Isn’t that good? In a word, NO, and the stresses that corn-ethanol places on the environment, the food economy, and the cost of living are serious. Farm production may not be able to keep up with demand, and, the article reports, even if production is increased, it may not matter:

“… even if new land is planted, argues Jeffrey Currie of Goldman Sachs, it will not necessarily reduce the cost of grains. Since high oil prices and generous government subsidies ensure that biofuels are profitable, any extra grain will be used to make more (ethanol). That will not dent the oil price (…). Instead, the price of biofuels has risen to that of petrol (gasoline), and the price of corn and crude oil, the main feedstocks for the two, have converged.”

How can it happen that food prices are being driven up with NO environmental benefit? Among other things, we should consider the following points:

  • the convergence of pressure from large national and multinational farming companies and from small farmers
  • the readiness of politicians to use public funds to “give back” to their constituents and campaign contributors through huge subsidies
  • the undoubted joy in some circles that this behavior can be successfully linked, however falsely, to “improving the environment”
  • the willingness of the public to believe that anything “natural” has to be better than alternatives

For additional relevant articles in The Economist and many other news and scientific sources, see the World Headlines link under my blogroll heading. Comments and feedback are welcome, as always.

© James K. Bashkin, 2007

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