Ethanol Not Reducing Food Supplies

Forums: 

Ethanol production isn't reducing food supplies
By Steve Grasz
SPECIAL TO THE ARIZONA DAILY STAR
If truth is the first casualty of war, it appears the "food fight" being waged by anti-ethanol interests has nearly achieved its first casualty.
The false idea that ethanol production is causing high food prices, and even food shortages around the world, has been so frequently asserted that Americans have begun to blindly accept the premise. However, when the facts are examined it is clear the accusations are untrue. Let's examine several of the myths about ethanol:
Myth 1: Ethanol is made from "food grains."
Fact: Ethanol is made from "feed grains" such as corn and sorghum. "Food grains" usually refers to wheat and rice. Blaming ethanol for wheat and rice shortages is unfounded. The type of corn used to produce ethanol is otherwise used primarily for livestock feed (about 90 percent); not for human consumption.
Myth 2: Ethanol "consumes" a huge share of U.S. corn production.
Fact: In 2006, U.S. farmers produced 10.74 billion bushels of corn and 1.8 billion bushels went to produce ethanol. The share going to ethanol is increasing.
However, making ethanol does not "consume" the corn. Ethanol production separates the starch from the other components. The protein and other nutrients remain, but in a less bulky form. One-third of the corn is converted to a high value livestock feed called distillers grain (by dry milling) or corn gluten feed (by wet milling).
Myth 3: Use of corn for ethanol production is creating food shortages and causing starvation around the world.
Fact: The U.S. is exporting more corn today than at any time in history. Exports in 2007-08 were 2.25 billion bushels, 6 percent more than in 2006-07. The U.S. Department of Agriculture recently raised its corn export estimates to 2.5 billion bushels. This puts corn exports at 63 million metric tons, a new record.
Myth 4: Ethanol is responsible for high food prices.
Fact: The price of corn is a very small factor in overall food prices. Only about 10 percent of U.S. corn is processed directly into human food products (such as corn syrup, starch and cereals). In contrast, the price of oil has a significant impact on food prices, as does the value of the dollar. Some analysts have estimated that oil prices would be 15 percent higher but for ethanol production and its replacement of large quantities of petroleum.
Ethanol currently supplies the same amount of fuel to Americans as our fifth-largest foreign supplier. Without it, gas prices (and food prices) would be even higher.
Less than 20 cents of each food dollar goes toward on-farm costs like grain. The value of the corn in an 18-ounce box of corn flakes cereal was 4.9 cents in 2007 (with corn at $3.40 a bushel). Today, with corn at nearly $6 a bushel, the value of the corn in a box of corn flakes is about 8.75 cents. So, even in a pure corn product, the impact on consumers is modest.
America needs ethanol now, more than ever. The U.S. imports 62 percent of its petroleum supply and this is projected to increase to 77 percent by 2025. The last time a new oil refinery was built in the United States was more than 30 years ago.
Taxpayers spend billions each year on military expenditures to protect our foreign oil supply while Congress refuses to expand domestic drilling for environmental reasons. In contrast, ethanol is made from renewable resources we grow right here in the United States. Its use reduces our dependence on imported oil. The U.S. ethanol industry will have the capacity to produce 10 billion gallons in 2008.
The idea that people must choose between food and ethanol is a false and dangerous premise. The next time you hear or read that ethanol production is starving children overseas or causing food prices to soar, consider the all-time record amounts of corn being exported from the United States ? and think again.
Write to Steve Grasz at [email]Steve.Grasz@huschblackwell.com[/email].
[/b]

Good article. Thanks.
"Ask not what your country can do for you, ask what you can do for your country."
John Fitzgerald Kennedy
[/b]

Now just to have unbiased voice of agriculture get a few minutes to explain this to talking heads on cnn....
[/b]

Thanks for the article....this is more reasonable than most of the distracters have been willing to admit or include in THEIR analysis....regardless....times are going to get hard, IMO, and I just hope that there are enough good hard people around the country to address the needs that will be forthcoming....the more rural America will be poised to be those that will do well....the more urban areas are going to struggle....hard to raise food in concrete...but maybe live stock will manage.....JMHO [?][:0]
[/b]

WASHINGTON, June 3, 2008 /PRNewswire-USNewswire via COMTEX/ --
U.S. Secretary of Agriculture Ed Schafer is leaning on a
weak reed in claiming that the ethanol boom is responsible
for only a tiny fraction of the dramatic increase in world
food prices, according to an independent agricultural economist.
"Most objective observers feel that the demand from the
biofuels sector accounts for anywhere from one-third to
two-thirds of the explosion in food prices, not the two or
three percent suggested by Secretary Schafer," said Dr.
Thomas Elam, president of FarmEcon LLC. "Crops that used
to be grown for food production are now being priced at
their value as a fuel supplement, with unpredictable and
very negative consequences for the food economy. The costs
of those crops to the U.S. food production system are also
being significantly increased by federal biofuels policy." Schafer's "two or three percent" estimate echoes the
comments of Edward P. Lazear, chairman and, at this time,
the only member of President Bush's Council of Economic
Advisers. Lazear told a Senate committee last month that
corn-based ethanol production accounts for only 1.2
percentage points of the 43 percent run-up in global
food prices, or about three percent of the increase in
the past year.
However, the analysis cited by Lazear counts only corn
that is directly consumed by humans, a relatively small
part of the overall usage of corn, Elam noted. By far the
most corn in the United States and in other countries is
used in livestock and poultry feed and is thus consumed by
humans indirectly in the form of meat, poultry, eggs, and
dairy products.
"The analysis of the U.S. government greatly understates
the role of corn in food production and therefore
significantly understates the contribution of the
skyrocketing cost of corn and other feedgrains to the
explosion in food prices," he said. "The analysis also
failed to account fully for the run-up in the price of
commodities that compete with corn for crop acreage." Midwest
corn prices shot up from about $2.20 per bushel 20 month
ago to $5.58 last month. Coupled with cost increases for
other feed ingredients related to higher corn prices, the
cost of producing chickens is up by about 45 percent.
Similar impacts are affecting other poultry producers,
beef, pork, and dairy, Elam noted.
"Far from all of the increase in producer costs have
shown up yet in wholesale or consumer prices," he said.
"Meat, poultry and dairy producers are struggling with
rising feed costs." The U.S. government requires fuel
companies to add ethanol to motor gasoline; the amount
required this year is nine billion gallons, which will
take more than three billion bushels of corn to produce,
Elam noted.
[/b]

Earth to Jam == come in Jam. When did the cost of production dictate what you recieved in the ag. market place? 2 years ago the price of corn was less than $2 alot of the time. Everything I read at the time claimed that was under the cost of production. Have you checked into pork production costs lately? Who is paying you guys to act so stupid? Hard to believe it comes naturally.
[/b]

Better be looking in the mirror for that stupid person. No where in that article is there a mention that the cost of production should dictate what one should receive. That has been the mantra of the parity folks out there, not me. Not sure what you are referring to but it sure was not the article I posted.
[/b]

JAM: As I have said many times, the primary culprit is the
FED devaluing the dollar and the resulting inflation. re:
"Coupled with cost increases for other feed ingredients
related to higher corn prices..." STOP! What does that
mean??? Continuing: "...the cost of producing chickens is
up by about 45%." Why don't you provide the total cost,
including transportation costs, to get that chicken in the
meat counter at the grocery store? I guarantee the extra
costs due to higher crude oil far overshadows corn. Beef
prices have been tame. Hog prices are in the dumps because
there is a glut of hogs. Corn prices are presently going up
cuz every body knows that yields are going to be down due to
wet, delayed planting or no planting at all. This has nothing
to do with ethanol. We still have high exports. There is no
shortage of corn. Did you get your check from OPEC this week.
lol. Best.
[/b]

Lets look at your so claimed "facts" 48. First you claim that the main reason for the price of corn to increase is the fall of the dollar and inflation. In 2002 the dollar index was at 120.80. In 2004 it fell to 80.4, a decrease of 44%. During that same time corn prices went from $2.85 to $3.35, an increase of 15%. However, the dollar hit a low at 70.40 in 2008. The percent change from 2004 until 2008 in the dollar index was 12%. During that same time corn prices went from $3.35 to $6.43, an increase of 48%. So while the dollar fell 44% corn prices only increased 15% and while the dollar fell 12% corn prices increased 48%. Your tie to the dollar just does not hold water. During that same time period (04-08) inflation FELL. So your claim that inflation and the fall of the dollar do not hold up at all.
As to your so called claim that "hog prices are in the dumps" is just patently false. Currently hog prices are quite good.
Your claim that corn prices are going up because "everybody knows that yields are going down" is only partly true. To correctly finish that statement you have to add that everybody also knows with yields going down and that over 4 billion bushels of corn HAVE to go to ethanol production the percentage of the remaining corn available to the marketplace is dropping dramatically. As a result prices are shooting higher to ration the quickly evaporating remaining supply of corn.
Your tactic of trying to place labels and call people names is eerily reminiscent of Joe McCarthy's tactics during the communist witch hunts. Instead of having any actual evidence he would imply, insinuate and blatantly try to label people "communist" to try to distract others from the actual evidence available. You continue to do the same here. Rather than discuss you try to claim that I work for oil companies, or that you represent agriculture and that I don't, or some other label whose only purpose is to evoke emotion rather than discussion and facts. Your continued attempts at this subversive tactic is only demeaning to you, as it became to McCarthy.
[/b]

Very many in the media are often failing to check their facts before going to the public with stories about ethanol and bio fuels. The suggestions that bio fuels have led to dramatic food inflation is pretty easy to disprove.
Though it is difficult to prove the exact impact of bio fuels demand on food prices, it is not difficult to prove the maximum impact of rising crop prices on the cost to produce food.
A great example is the choice of the Washington Post article on the "Mexican
Tortilla Crisis" as PROOF that corn ethanol is causing rampant food inflation. This article was mentioned in an October article on PBS Online titled ?Questions Loom Over Increased Ethanol Use?. All one needs TO DISPROVE the Post?s suggestion that US ethanol policy was the primary cause of the crisis is information stated in the Washington Post article, facts about the recent history of US corn prices, the fact that there is 56 pounds in a bushel of corn, and the math used to solve story problems in grade school.
When one uses the steps above to analyze the "facts" stated in the Post article it is suddenly apparent that in the 12 month period leading to the article in the Post, US corn went up about 4 pennies per pound. During this same time frame the Post suggests that tortillas in Mexico went up about 30 to 60 cents per pound. The Post suggests that this is primarily due to US ethanol. Did I miss something in grade school math that suddenly makes 4 approximately equal to 30 to 60?
How does a price increase of 4 pennies per pound in US corn lead to a 30 to 60 penny per pound increase in corn based tortillas in Mexico? If the price of tortillas in Mexico had actually tracked US corn prices a Mexican working for the minimum daily wage would use less than an additional 1% of his wage to pay for more than enough tortillas to feed two people for that day. Instead of digging in to get the truth in the story, the Post found it all too convenient to join the blame bio fuels crowd that is all too prevalent in the media.
All time highs corn prices in this area are about 10 pennies per pound. Corn at all time lows in my 34 year history of farming is about 3 pennies per pound. Any suggestion that US corn prices have caused over a 7 penny per pound increase in the price of products that directly use corn during the entire 34 year period is total nonsense. If your corn flakes or tortillas have gone up more than 7 pennies per pound in the last 35 years, US corn growers or world bio fuels policies can't be blamed for the additional price increases.
In the same 34 year time frame the price range in corn prices has changed the cost of producing a pound of pork in the meat case by a maximum of 22 pennies per pound. Again, if the price of retail pork has gone up more than this in 34 years, these added costs have nothing to do with corn prices or bio fuels.
As I mentioned above, it is easy to prove some of the things that can't possibly be true about food inflation and bio fuels, yet it is hard to prove the exact impact of world bio fuel policies on food inflation. The reasons for this inability to be exact are the various reasons that are working within the commodity markets of the world. Some important influencers are-
1) There is significant new world demand for better diets especially in China and India.
The US is exporting lots of corn at these prices.
2) Though US grains and oilseeds aren't very far from historic highs, the decline in the value of the US dollar has made US grains and oilseeds very competitively priced overseas.
3) There is a lot of speculative interest in very many commodities throughout the world.
4) World weather in major crop growing areas has often been volatile.
5) Bio fuels have added a demand base for an estimated 2 to 4% of the world's crop producing capacity.
6) High energy prices have increased costs and risks of ag production as well as costs and risks in food processing and distribution.
Knowing the above, how do we determine how much of the recent price increases for world crops that end up the food supply is due to bio fuels (5 above)? We could-
a) quote the widely varying results of research that has been done.
b) use my approach above and at least prove what can't be true.
c) look at other factors that are most often ignored in the media.
If one were to look at world commodity prices that are not affected by world bio fuel policies and see the price ranges we have important measures as to the impact of the other non bio fuel factors above. If bio fuels are the primary cause of rising food commodity prices how does one explain the increase in the prices of things as diverse as copper, rice, scrap metals, steel, aluminum, and energies? How would one link the price increase of any one of the above to bio fuels? Even in the case of rice the link would be very weak or it does not existent. I know of no cases where land that is suitable to grow rice has been converted to other crops due to demand for bio fuels. Did bio fuels mysteriously cause a shortage of rice or are other factors in play in the rice market?
If reputation in the media is important, I would encourage all in the media to carefully check their facts before going with stories on bio fuels. There is currently so much nonsense masquerading as fact that it will take a bit of time to keep your reputation for reliability and accuracy.
Examples-
1) The Washington Post above ignores the difference between 4 and 30 to 60.
2) Glen Beck indignantly stated that we use 1 ΒΌ gallons of GASOLINE to make a gallon of ethanol from corn.
3) The USA Today thinks that it is logical that the price of beer in Europe would have to go up $1 per liter to cover the added costs of the barley due to bio fuels.
4) World News Daily suggested that our Thanksgiving turkeys in the US went up $69,000,000 due to increased costs for corn which wwas entirely due to bio fuels policies.
5) The so called Conservative Think Tank, The Heritage Foundation, believes at least 1 and 4 are logical.
6) Sean Hannity hosted a guest who suggested that we use over 400 BUSHELS of corn to make enough ethanol to fill an SUV ONE TIME. (this guest was only off by a factor of 56 in that we use over 400 pounds, 30% of which remains as a higher protein livestock feed).
7) Movie theater owners got press coverage suggesting that movie popcorn may have to go up 15 pennies per serving due to bio fuels.
If you want to test your math skills, try to defend the above claims with the facts. Using any one of the sources above to question the wisdom of using some of the planets? crop production capacity to make bio fuels is just adding to the lack of thought in the debate in much of the media at this time.
"Ask not what your country can do for you, ask what you can do for your country."
John Fitzgerald Kennedy
[/b]

EXCELLENT post Jabber. The fact that gold has gone from $220/oz to $1,000/oz has nothing to do with ethanol. The price of all commodities have gone up 4-6 time what they were just a few years ago, yet only ethanol gets the blame.
How is it that the price of oil goes from $10/barrel to $137/barrel and yet it gets no blame for the increase in the price of food. Potash goes from $120/ton to $800/ton, NH3 from $250/ton to $850/ton, and yet all talk is about the cost of food because of ethanol.
I think 48's theory of rising food cost because of the falling value of the dollar is much accurate than Jam's theory of demand for corn because of ethanol. In many cases the packaging the food is in cost more than the corn in it. The lettering on the boxes is more costly than the corn in the package. Almost every thing we buy starts out with oil as a base product from which it is made.
You can not raise $2.00 corn using $137/barrel oil. If you would completely outlaw ethanol, the price of food will not come down, only the production of corn would drop.
[/b]

Well 3020, if you think 48 has the answer with the falling dollar then answer why corn prices only rose 15% while the dollar fell 44% but while corn increased 48% the dollar only fell 12%, all during the exact same time period. None of you have answered that. None of you have answered why, if ethanol results in so much feed why the feed numbers have INCREASED the past 2 years rather than falling showing the impact of DDG's. Basic questions you guys need to answer, with some actual facts. No one is talking about outlawing ethanol, only removing the mandates. If ethanol is such a good buy then the mandates are not needed. You cannot claim that demand is excellent while at the same time claiming that demand is being stymied by big oil. Cant have it both ways.
[/b]

Jam, I think the fact that oil has risen 1300% has a lot more to do with food prices than does the ethanol mandate.
The dollar has fallen by 60% yet oil has gone up 1300%. Is that because of ethanol?
[/b]

So now it is not the dollar. It is not inflation. Everything is the fault of oil. Is that the claim now?
[/b]

That's been the claim all along. Inflation caused by peak oil. It is pretty remarkable when you think about it. The price of oil up 1300% yet the price of food has not even doubled.
[/b]

jabber: Excellent post. There is only one caveat that I
wish you would stress more. Tortillas are made from food
grade white corn in the US. I don't know about Mexico.
Pop corn is...well...popcorn. Neither are No. 2 yellow
FEED corn. While it is true that some yellow corn hybrids
like the old 3162 were classified as both feed and food
grade. The overwhelming majority of food grade corns are
NOT feed corns. Many are white. The point is that claiming
food grade corn is somehow impacted by ethanol is insane.
It's apples and oranges. Keep up the good work.
[/b]

JAM: I'm too busy right now to refute your statements point
by point. In any inflation there is a lag factor as it ripples
through the economy. As far as your comments about Senator
McCarthy, he was right. The State Department and the United
Nations were full of Communists then and NOW. I forget who,
but he was crucified by the MSM for "falsely" accusing some
individuals. Then, later it turned out that they WERE communists.
It is a big, big stretch to accuse me of McCarthyism toward you.
It is obvious that you are pushing a Big Oil/OPEC agenda. And,
I think that I know who you are, and it would APPEAR that you
are a registered lobbyist. But, I will not elaborate until I
have the hard, cold facts. I am not pushing any agenda other
than re-establishing US energy independence. I don't grow corn.
I don't own stock in any ethanol plants. And, I am not a paid
lobbyist. Best.
[/b]

48, let me ask you a simple question. If there had not been an ethanol blender credit and no mandates would less corn have been used to make ethanol? If so, do you think corn price would be lower?
[/b]

beaner let me ask you a question if there had not been a drought in Australia and a freeze in Kansas do you think the price of wheat might have been lower? The answer to your question beaner is we will never know for sure what the future would have been, but we have plenty of corn and a useless dollar to buy it with. The fact of the matter is corn is worth at least twice as much if you can get twice the good out of it. So where we have a fuel shortage it is only good economy to take feed and fuel off the same acres.
[/b]

Of course the drought in Australia and freeze in Kansas impacted the wheat price. That is because it restricted the supply. However, ethanol subsidies/mandates have the effect of restricting the supply of corn available for non-ethanol uses. Only 1/3 of the corn remains after ethanol production to use as feed and that feed has had most of the energy removed. The strong demand for corn to make ethanol also caused higher corn plantings in 2007 which greatly cut soybean plantings. The result was inordinately high soymeal prices and inordinately high corn prices. It is the livestock and poultry producer that is paying for the subsidized use of corn to make ethanol. And soon the consumers will be paying the full cost in terms of higher prices for meat, eggs, vegoil, and milk. And consumers outside of the U.S. who use corn directly for food (regardless of whether it is yellow corn or white corn) as well as those who consume soghum or soybeans already are paying through the nose for those commodities. I am not saying it is wrong. However, I think all on this board who refuse to recognize the impact are undermining their own credibility.
[/b]

The price of corn might have been lower, but that doesn't mean the price of food would be lower. With out ethanol the price of fuel would most certainly be higher. Corn is a very small part of the price of most food. The cost of processing, packaging, and shipping, which is mostly petroleum based, would have raised the price more than the cheaper cost of corn would have lower the over all cost.
I agree with Beaner and Jam in that the subsidy should be eliminated, however I don't believe the oil companies should be allowed to determine how much ethanol is blended into the gasoline.
[/b]

The fact of the matter is corn is worth at least twice as much if you can get twice the good out of it. So where we have a fuel shortage it is only good economy to take feed and fuel off the same acres.
[/b]

Beaner at 17:00 hours on Monday a group of us agweb folks will be going on a one hour guided tour with history related to the old army airbase as a tribute to Active Duty and Veterans of the Armed Services of this great nation. You are welcome to fly in and join us for that, if you arrive early you are welcome to join in on all the activity. We will be having prime Angus beef steaks afterwords.
[/b]

I think you are also missing a even bigger problem. If the lowest price is what you want, two things need to happen. (1) only trade the auctual crop size on the comodities excanges not two or three times it's real size. (2) only let producers and end users trade. The hedge funds and pure paper traders have distorted all markets. The price of corn would probably be about $3 to $3.75 at best. Oil would be closer to $55 to $80. Look around everybody is yelling wolf it's only a young puppy. there is at this time no shortage you can buy all you want no limits, just takes more money. Money and greed are making a"subprime mess" of these markets. I was looking forward to raising a crop to capitalize on it but Mother Nature has changed that for now. The hangover from this is going to be a duuuuzzzzzy.
[/b]

Beaner: The 51 cent blenders tax credit, IMHO, does not affect
the price of corn. It goes to the blender not ethanol and not
capitalized back into the price of corn. The 54 cent tariff on
cheap Brazilian sugarcane ethanol protects Big Oil's gasoline
just as much or MORE than US corn based ethanol. The mandate was
necessary because it is irrational to expect Big Oil to voluntarily
blend ethanol at the expense of it's own gasoline. Corn exports
are 2.5bil bu vs corn for ethanol at 3.0 bil bu=83% corn for
ethanol. A big number. Let me ask you a simple question. Are
EXPORTS responsible for the increase in the price of corn???
Ending stocks are .763bil bu. There is no shortage of corn
period. The price is not up because of DEMAND. We are swimming
in corn. The price of all commodities: crude oil, corn, and
gold are up because of inflation. We have inflation because
the FED is inflating to provide liquidity to the Big Banks
that own it due to the sub-prime lending fiasco. The sub-
prime is DEFLATING the housing market. Real estate is no longer
the tried and trued inflation hedge that it once was. So, you
have pension funds and institutions using Long Only Index Funds
as an inflation hedge. That has more to do with any rise in the
price of corn than ethanol. But, the main driver is the FED and
inflation. Period. Best.
[/b]

Beaner: You and JAM and dec repeat the same propaganda over
and over. It is Propaganda 101. If you repeat a lie long
enough, people start to believe it. And, it is working. The
MSM are having an effect on the American people with their
Food vs Fuel hysteria to sell newspapers and TV ads. As for
as losing credibility, when you sell SB for EXPORT for $30/bu,
your concerns about the starving people in the world leave me
non-plussed. BTW, we can slug it out, but I still admire you
as opposed to dec and JAM. Best.
[/b]

Hey Verby, what airbase are you talking about? Has it been closed or is it still active?
Wright Patterson Air Force base in Dayton OH has a very good museum, if you are ever in the area, well worth the visit.
[/b]

I am not getting $30/bushel for soybans. Far less. And I only offer them for sale with no subsidy. If someone wants them at the price I offer then I sell them. No where does the government subsidize my sale or mandate someone buy my soybeans. My buyers are top tofu makers in Asia who pay for high quality because they earn more doing so.
[/b]

r3020 ,McCook Ne WW11 place.
[/b]

r3020 This one is closed and it will be somewhat like viewing the ruins of an old society. Which isn't all bad as to many have forgotten. r3020 if you change your mind bring a law chair and good attitude.
[/b]

JAM: We do not have licentious freedom of speech. For example,
it is against the law to yell "Fire" in a crowded theater.
I showed your seemingly pro-communist post to a Mormon (Temple
Mormon) friend of mine. He became so incensed that he began
shaking. I have many Mormon friends, and I know that the
Mormon Church is one of the most anti-communist institutions
in the world. I really find it remarkable that, as a Mormon,
you went down this road at all. You are trying to portray me
as a bully using McCarthyite tactics. If you asked all the
members of this discussion board who are the biggest bullies,
the overwhelming response would be...dec and JAM. lol. Best.
[/b]

JAM: I am not on a McCarthyite witch hunt to find out who
you are. I have averred that you are pushing an agenda, and
you steadfastly protest that you are not. I have wondered if
you are paid to attack ethanol, and you say you are not. Well,
let's see if we can use a little Aristotlian logic based on
your on public postings to see who you might represent. You
say you are a practicing attorney, yet you say 100% of your
income is from Production Agriculture. You say that you have
directly influenced legislation. You say you know more board
members of the National Cattlemens Beef Association than I
do. You say: "OUR tests show illegal residues of virginiamycin."
You disavow any connection with Organic Farming, but all of
your statements are consistent with a packer with a NATURAL
program. So, it would appear that you are an attorney
employed or retained by a packer. Most farmers, cow-calf
ranchers, and independent feed lot owners do not hold packers
in the highest regard. That would explain why you are so
loathe to divulge this information. Packers with their
controlled feed lots and captive supplies and vertical
integration do not like anything that raises the price of
the corn that they feed. You believe corn for ethanol does
in fact raise the price of that corn despite the fact that
corn EXPORTS are right up there with corn for ethanol. Readers
have a right to know if someone slamming ethanol is pushing
an agenda. So, how about it JAM??? Are you an attorney
representing a packer??? Have a nice day.
[/b]

You guys are a work of art. When you call names and state your opinions, no matter how unfounded they may be, it is fine. But
when someone else does it and it goes against your line of
thinking, they are arrogant and condescending. That is the
definition of a double standard. If you guys cannot handle a difference of opinion, that is your problem and I feel sorry for
you. And 3020, nowhere have I said that any economic benefit to farmers only goes to farmers. You stated that from taking only
select parts of my posts and not from any single quote I have ever made. On the other hand if you are trying to say that ALL payments
to farmers ALWAYS benefit all others then you are also wrong there. The fact is that agriculture has been the beneficiary of many government programs and has far greater weight in government than what its numbers would otherwise indicate. This is the result of extensive special interest lobbying on the part of agriculture.
Your explanation of a circular argument was good except it was your argument that was circular, not anything I stated.
And 48, now I am pro-communist. You must have one of the narrowest minds in the entire world. I have not stated I was pro-communist. What I did state was that there is freedom of speech and that includes freedom to be a communist if one so desires. I asked you
to explain exactly what speech was not free and the only reference you gave was the yelling fire one. Yelling fire in a crowed theater is not the same as believing in communism.
As far as invoking your Mormon friends opinion to try to make me
look bad and not following my religious beliefs go back and ask
your Mormon friends what the NUMBER ONE belief of the church is.
That belief is free agency and the ability to choose. If they state different than that then they are not in line with church teachings. Plain and simple. Choosing a political system is a choice not dictated by our church. One of our basic tenants is to follow the laws of the land, whatever they may be. Whether democratic or communistic. There are many Mormon churches in communist led countries and not once has the church ever told those people
that they should not be communist. In fact, let?s even take it
one step further and ask your Mormon friends the difference
between communism and the United Oder. They will (or should)
know what that is. If they need help in explaining those
differences tell them I can refer them to specific church
doctrine for their enlightenment. So stop trying to tell me
what my religion teaches and how to practice it. That is the
epitome of arrogance when one person tells another how they
are suppose to live their religion.
[/b]

JAM, I am not trying to get in the middle of a dog fight, but I do take exception with one of your comments: "The fact is that agriculture has been the beneficiary of many government programs and has far greater weight in government than what its numbers would otherwise indicate. This is the result of extensive special interest lobbying on the part of agriculture."
I do agree that MANY of the national organizations have other interests at their core than the good of the smaller American farmer; however, the REASON there is more importance given to supporting Ag is because WIHTOUT FOOD there would be anarchy! Food rates right up there with air and water....Soooooo....I believe the policies, especially those that focused on parity level supports, were geared towards assuring a sound and safe food source.
Have a good day.
[/b]

Jam - As a small farmer the payments allow us to keep farming. On several years those payment really helped to minimize our operating loss and for many years they helped us show a small profit (maybe $15 an acre) A few years like this one we will make several hundred per acre mostly to save for the next bad year. Ag payments, Crop insurance and marketing are important so that we can continue to operate. If you would rather we give up our 200 acre operation to some larger operator then take away the farm program. If you want affordable food at the grocery store you will be better served to consider increasing the supports to small farms. I have to generate more than half our income from off farm activities as it is. Now you allude the country would be better off if I moved into town.
Beleive it or not you have been directly benefitting from the farm program for a long time with lower prices at the store.
[/b]

Dave, I agree partially with you. Food is important and government policies have been set towards that end. I have not said otherwise. On the other hand there is no question that some government policies where implemented to only get the farm vote and favored only farmers. And my statement is still true that agriculture has much more leverage in Congress than its numbers would indicate and they are special interest groups. Something many on this board continue to bad mouth while being the beneficiary of.
Not sure what your reference to parity was since farm policy has not been driven by that since the 1930's.
[/b]

Well 48, your ability at Aristotelian logic has failed miserably. No I am not an attorney for a packer, never have been. You want to know who I am to make it personal. Knowing who I am has nothing to do with my statements. They are either factual or not factual. Who I am is not relevant. The same as who you are does not make your arguments any better or worse. They are what they are.
Binswoh, I really do not know where you guys get this stuff. I have never said anything like you said. Where did I say that small farmers should quit and move to town? Not once I have even alluded to something like that.
[/b]

Iowa55 the south hanger is privately owned. The one we were in is the same structure in design with tin roof. I'll ask the question you have and get back to you.
[/b]

Jam, I think you got me mixed up with Jabber in your discussion about a circular argument.
If you truly want to make this a better country, work for tort reform. The trail lawyers are one of the strongest lobbies in the nation, and most of congress are lawyers so they take care of one another. The biggest injustice ever in this country was the extortion of the tobacco companies, all of which ended up in the pockets of the lawyers and politicians. You go right ahead and lobby for who you must, I will raise corn, beans, wheat, hogs, and cattle, and sell to the highest bidder.
[/b]

Ethanol Stocks Are Poised to Refuel
By ANDREW BARY
Everyone's dumping on ethanol, but the biofuel has a bright future. Three stocks that could get a healthy burst of energy in the coming year.
NEXT TO CIGARETTES, FEW products are more vilified than ethanol. The corn-based alcohol used as a substitute for gasoline has been blamed for driving up food costs, leading to malnutrition and riots in the developing world. A top official of the United Nations has blasted ethanol as a "crime against a great part of humanity."
Even Wall Street, which loved ethanol stocks in 2006 and '07, has turned against the business, because of growing supply and concerns about the future of the controversial fuel. Ethanol producer VeraSun Energy (ticker: VSE), at 6, is down 61% this year, and off 80% from its 2006 high of 30. Aventine Renewable Energy (AVR), at 5.25, is down 59% on the year, and far below its '06 peak of 43, while Pacific Ethanol (PEIX), at 3.24, has fallen 60% year to date, and 90% from its '06 high. Yet, even after this shellacking, most analysts covering the industry currently rate the stocks Neutral or Sell.
Table: Fill 'er Up?1
Ethanol stocks recently got a momentary lift from their lowly levels after all three companies reported first-quarter operating profits, and Congress passed a farm bill, over a presidential veto, that preserves most of the government's ethanol subsidies. What's more, the rally may resume, as the stocks are depressed, the businesses are profitable and the companies generally trade below the replacement cost of their ethanol plants.
Aventine is valued at about $1.40 per gallon of ethanol capacity, while VeraSun trades at the equivalent of about $1.50 per gallon. It costs about $2 per gallon to build a new ethanol facility, or $200 million for a plant that produces 100 million gallons a year.
DOW JONES REPRINTSThis copy is for your personal, non-commercial use only. To order presentation-ready copies for distribution to your colleagues, clients or customers, use the Order Reprints tool at the bottom of any article or visit: www.djreprints.com. ? See a sample reprint in PDF format ? Order a reprint of this article now.
If valued at replacement cost, Aventine's stock would trade at 12, or more than twice recent levels; VeraSun would trade at 11, nearly twice its recent price. Pacific Ethanol, which recently raised $28 million in a dilutive equity offering, trades slightly below replacement cost -- because it operates in the more protected West Coast market.
The Aventine and VeraSun estimates are based on projected 2009 capacity, after the completion of plants under construction. Future capacity is divided by each company's enterprise value, or equity-market value plus net debt. VeraSun is the biggest of the three, with projected production of 1.6 billion gallons, compared with 433 million for Aventine and 220 million for Pacific Ethanol.
Ethanol stocks aren't classic value plays, as the companies have a lot of debt and potential liquidity issues. Aventine, for instance, holds $127 million worth of illiquid auction-rate securities that it had planned to use to fund construction of new plants. The company has written down the securities to about 80 cents on the dollar, but is unwilling to sell them at a big loss. To fund completion of the plants, Aventine may need $60 million of additional financing, which it's aiming to line up by the end of the current quarter. If that money materializes, it could lift the company's shares.
The Bottom Line:
Ethanol producers VeraSun Energy, Aventine Renewable Energy and Pacific Ethanol are trading below book value. All could rally in the coming year.
Ethanol producers also are subject to swings in the price of ethanol and corn, and could be vulnerable to shifting political winds. Yet, as Aventine CEO Ron Miller notes, "ethanol is having a positive impact on gasoline prices."
Ethanol stocks trade at a discount to their book value. Aventine and VeraSun have book values of $8 a share, while Pacific Ethanol's book is $7. Cascade Investment, which runs money for Microsoft's Bill Gates, was a large early investor in Pacific Ethanol, but it lately has been selling large blocks of the stock, depressing the shares.
The stocks aren't cheap based on earnings, however. Aventine fetches 19 times projected 2008 operating earnings, and VeraSun, 21 times estimated profits. Pacific Ethanol is expected to operate at a loss this year.
The industry's profits are nothing if not volatile; 2006 was a good year, while '08 is less so. Aventine and VeraSun look more appealing based on a multiple of pretax cash flow, or Ebitda (earnings before interest, taxes, depreciation and amortization). They trade for about four times estimated 2009 Ebitda, assuming an operating margin of 40 cents per gallon.
THE ETHANOL INDUSTRY BENEFITS from federal subsidies, tariffs and production mandates. Oil refiners get a credit of 51 cents per gallon of ethanol blended with gasoline. The typical blend is 90% gasoline/10% ethanol. Due to a federal dictate, more than half the gasoline sold in the U.S. now contains ethanol, which accounts for 7% of total gasoline consumption. There is also a 54-cents-a-gallon tax on imported ethanol. The government mandates that 9 billion gallons of ethanol be used this year, rising to 10.5 billion in 2009 and 15 billion by 2015.
[ethanol corn husking]
Dave Reede/Getty Images
Ethanol has strong support from farm-belt legislators, since demand has helped corn prices nearly triple in the past two years; it also cuts gasoline prices.
Ethanol has been widely criticized as a wasteful, inefficient way to fuel automobiles. The industry, many argue, wouldn't exist without federal subsidies.
The critics make valid points, but ethanol has strong bipartisan support on Capitol Hill, and that's unlikely to change. The farm bill preserves the 54-cent tariff and reduces the refiners' credit to 45 cents a gallon from 51 cents through 2010. The tariff helps keep low-cost Brazilian ethanol out of the U.S., but Brazil's potential exports total only 1 billion gallons, a small fraction of U.S. needs.
REFINERS ARE BLENDING ethanol with gasoline not because of government edicts but because it makes economic sense. Ethanol now costs $2.50 per gallon -- or about $2.00 a gallon to refiners after the federal subsidy. The wholesale price of gasoline is above $3.30 a gallon.
This means that refiners save about $1.30 per gallon by using ethanol rather than pure gasoline. The savings per gallon of a 90/10 blend of gas and ethanol relative to pure gasoline is about 13 cents (10% of the $1.30 differential between ethanol and gasoline). Much of that gets passed on to consumers.
Then there are the savings to motorists due to the fact that gasoline demand is reduced by nine billion gallons annually. It's estimated that ethanol may reduce gas prices by a total of 35 cents a gallon. It may not feel like anyone's getting a deal at the pump right now, but in fact, a typical American family using 1,000 gallons of gas annually may be saving $350 a year thanks to ethanol.
ETHANOL PRODUCERS ARE profitable despite high corn prices of $6 per bushel. A bushel of corn, weighing about 56 pounds, makes nearly three gallons of ethanol, plus corn by-products that are fed to animals. And ethanol has strong political support in the farm belt because it has contributed to a near-tripling of corn prices in the past two years.
[ethanchart]
Wall Street fears that ethanol profit margins, now 40 to 50 cents a gallon, will narrow in late 2008 and 2009 as annual industry capacity rises -- from 9 billion gallons now to 13 billion gallons in early '09. This could cause a glut of ethanol on the market. The good news is that little new supply is expected to come on after 2009 due to the depressed valuation of ethanol producers and tough conditions in the credit markets. Plans for new plants are being scuttled, although those under construction likely will be completed.
Ethanol may be controversial, but it has powerful friends in Washington and is helping millions of cash-strapped Americans save money on gasoline. This suggests that the ethanol industry is here to stay -- and that hated stocks like Aventine and VeraSun could reward brave investors in the coming year.
[/b]

Jabber: This is a sea change for O'Reilly. He used to
say ethanol was a boondoggle. lol. Bill is a devout
Catholic. Best.
[/b]

I don't watch Bill, but have heard him on the radio a few times. I usually agree with him. He seems to be saying that if the republicans don't raise taxes on the oil companies, and bring the American people some relief, they will get trounced this fall. Well, raising taxes on the oil companies will not bring relief to the American people. As long as the oil companies are working within the law it is none of their business how much they make, this go along to get along is stupid. If they want to get reelected they need to do the right thing, explain to the American people what they believe to be the cause to high energy prices and then explain what, if anything, they want to do to help lower the price.
Raise taxes on oil companies and the price of gas goes to $10/gal, then what, raise taxes again? Might be good news for the Federal treasury, but it will be devastating news to the American consumer.
Also remember, we are just a hop, skip, and a jump from big oil. If there is a windfall profit tax, do you think it will be on farmers, or our suppliers?
[/b]

jabber/r3020: There's a lot that I don't agree with O'Reilly
on. But, he is the most watched show on TV. And, he has gone
from saying ethanol is a boondoggle to mandating flex fuel
vehicles. This is progress!!! This can only help. Best.
[/b]

quote:
Originally posted by 48
[br]jabber/r3020: There's a lot that I don't agree with O'Reilly
on. But, he is the most watched show on TV. And, he has gone
from saying ethanol is a boondoggle to mandating flex fuel
vehicles. This is progress!!! This can only help. Best.


Yep. I wasn't thinking about the article in those terms.
PS Questioning Bill's church affiliation was just a joke as he quoted
the Rev Wright. I am guessing Obama didn't quote the guy on the
campaign trail.
Labor is prior to, and independent of, capital.
Capital is only the fruit of labor,
and could never have existed if labor had not first existed.
Labor is the superior of capital,
and deserves much the higher consideration.
Abraham Lincoln
(the original Republican)
[/b]

Here is one of the premier Food Before Fuel anti-ethanol
tree hugger groups. JAM should love this. lol.
http://www.foodb4fuel.com
[/b]

We are trying to get the Army Reserve and the National Guard to build their new base out there as it would be far enough away from the population center... something the last generation taught us was important. Gravel roads and such to make for more realistic training.
[/b]

JAM: You are a spinmeister par excellence. I will give
you credit for that. lol. $7-8-9-10 corn, who knows, is
going to curtail demand dramatically. I am almost tempted
to take your bet. lol. You don't want to take mine do you?
If we ever get a bet, we'll let dec hold the money cuz the
coffee pot is always on. Unfortunately, for both of us,
after dec subtracts his escrow fees, neither of us will
get anything. lol. Best.
[/b]

SAC museum near Omaha is a good place to visit if you are ever near Omaha.
[/b]

Sac is just west of Omaha 20ish miles, the Henery Dorly Zoo is also world class. Verb. what are you doing on the computer? you promised us youd have ALL those 'dogs trained to stand at attention now get out there and get at it. be in Sun night.
[/b]

First, I have stated before that I am not a paid lobbyist either. 48, you don't know anything about me but that does not stop you from trying toss out emotional labels. I have no ties to any oil company or concern other than my mutual fund probably owns some oil stocks. But since you cannot answer my basic questions it appears that your only recourse is to try to label and call names. Have at it.
Second, your revisionist history is quite interesting. McCarthy falsely accused some US generals. He had no evidence, etc. He, like you, was just using emotional labels to try to bully his way into peoples lives. Besides, if you are as patriotic as you claim then it would seem that you would want to actually defend the US Constitution which would allow someone to be a communist if they so like.
Third, you are doing what you claim that some of us are doing. repeating the same thing over and over again as if it is true. The blenders credit is passed back to ethanol producers. The study 3020 cited showed that. Virtually every Mi9dwest land grant university has shown that. The only thing you have shown is that the oil companies take the tax credit. You have not shown that the price is not passed on.
Fourth, We are not swimming in corn. 763 million bushels is only a few weeks worth of corn. And we will not even end up with that big of a supply because of poor weather this crop season. It is very possible that by the start of the 09-10 crop year that we could be down to less 2 weeks worth of corn. Any supply or production problems will mean that the market will have to go to extreme prices to try to ration an extremely short supply.
Fifth, it is not speculators driving up the price of corn. Anyone that says that only end users and producers should only be allowed to use the market has no understanding whatsoever of the futures markets. Furthermore, forcing delivery will not cause convergence. That has been tried before. The result has been the elimination of the market, not a forced convergence of basis. Learn how the markets work before coming up with solutions. But then I know that solutions are much easier to come up with if you don't actually understand the problem.
Sixth, The idea of complete US energy independence is laughable. It is not possible with world trade the way it is. But to claim that a supply of ethanol that amounts to 3-4% of the US gas use has greatly reduced the price of gasoline while a mandated 33% use of corn has not had much, if any, effect upon the price of corn is also laughable.
Seventh, 48, you continue to say that inflation is a major cause of this but yet your only response to my question to explain why corn prices have shot up with just a small decrease in the dollar while when the dollar collapsed corn prices barely moves, other than to say that there is a "lag" time shows that your explanations cannot be supported. A much better explanation than "lag" time is needed. If that is the only answer you can come up with, say so. We all wait for your esteemed wisdom and to show us how YOU represent agriculture while the rest of us don't.
[/b]

quote:
Originally posted by Iowa55
[br]Sac is just west of Omaha 20ish miles, the Henery Dorly Zoo is also world class. Verb. what are you doing on the computer? you promised us youd have ALL those 'dogs trained to stand at attention now get out there and get at it. be in Sun night.


We have a bunch of dumb pups right now that will stand at attention. No training necessary. I've been out getting the 1939 Farmall A running I promised 48 that it would be sitting out front so he wouldn't drive on by. I lined the fuel tank so it could handle good fuel like ethanol.
[/b]

Add new comment

Images
More information
  • Files must be less than 2 MB.
  • Allowed file types: png gif jpg jpeg.
Attachment
More information
  • Files must be less than 2 MB.
  • Allowed file types: zip rar.