There is a lot of confusion and misinformation in the news today about energy options and policy decisions and Ethanol's role in the whole mix.

The Wall Stree Journal had this article which ethanol supporters found full of holes..

http://online.wsj.com/article/SB10000872396390443404004577581140907497810.html

As others have pointed out my beefs would be that there are pennies on the dollar of corn in a box of corn flakes.. we spend more on the advertising and probably on the transportation/and the box.. then the farmer receives.  Also we seem to flip back and forth from the realization that we have a tremendous capacity to produce grain in this country (when it rains..)

In the 1980's the government was spending upwards of $30 Billion in transfer payments to hold agriculture together as well as implementing set-asides with as much as a third of the acreage dictated to be "left out" of production because we were literally running out of room to store stuff.  We entered the 1988 drought I believe with something like 4.5 Billion Bushels of Corn in Carry-over.. (which is another reason why THAT drought spike was a flash in the pan vs today..)  

However, THAT period was very hard on the Agriculture side.. in 1985/86 Cash Corn prices traded at or below $1.00 per bushel in the cornbelt.. and YOU COULD NOT keep things afloat under those conditions..  A friend of mine's father took his life during that winter because of the stress he was under.. it was a pretty "bleak" time to be involved in production agriculture.. and I remember it well.

So with that as a starting point.. and the realization that commodity prices move in tandem.. high energy prices appear to correspond with high commodity prices.. aka the Energy spikes of the Early 70's through the Early 80's correspond well with prosperity in production Agriculture.. As well as the Energy busts by about 1985.. and "the Farm Crises" as it was known.. when Willie Nelson started his "Farm Aid" concerts.. etc.. as well as 1999'ish and the post Iraq War I energy bust..

It SEEMED like a good idea to me.. that throwing the bounty of Agriculture into helping to even out the bumps and valley's of energy policy would be a good idea...??? 

The History of US Agriculture is one of Chronic OVER PRODUCTION.. since we settled the land in the late 1800's.. and Kansas grew and raised it's largest corn crop in 1889 of 259 miln Bushels on 7.3 million harvested acres..

Stop and think about that for a moment..

259,000,000 bushels of Corn raised in Kansas in 1889.. BY HAND.. with mules and draft horses..

That was a record that wasn't bested until 1992's 259.5  million bushel crop.. 103 YEARS later..!!!  For over 100 years we tried to constrain production.. OR find new markets.. "how about flooding the wheat market?" and the government gave us all sorts of Agricultural supports and land ideling schemes.. including today's CRP.. OF WHICH there is STILL over 30 million acres laying "in reserve."  (granted some of that needs to stay there..)

So if the Wall Street Journal isn't "bitch"in" about TOO MUCH production and all the WASTED TAX DOLLARS spent so support the US Agriculture sector.. (okay.. we'll work on that..) NOW they are "bitch'in" about NOT ENOUGH production...

(sigh.. face palm.) 

"Always something"

Instead of $30 billion in transfer payments per year made to farmers in the 1980's.. we TRANSITIONED to subsidizing a FUEL ADDITIVE to help the CONSUMER who was paying THOSE TAXES and in effect GAVE THEM BACK.. THEN we even PHASED THAT OUT.. and now this..  ARRRGGGHHH!!!

okay.. rant off.. back to subject..

Part of the problem is living in a dynamic world.. things change.

There are REAL BENEFITS to ethanol as I believe a responder to the Wall Street Journal article notes..  a Brian Terborg ("atta boy" Brian!) on page 3 of the comments section says..

"This article is full of misinformation and philisophical statements not based on facts. I'll list some of the correct facts here. 1. When corn is used to make ethanol 40% of the nutrition originally in the corn is returned to food and feed via coproducts that primarily include distiller's grain; a feed more dense in protein, fat, and fiber than whole corn on a per pound basis. This means that ethanol used about 23% of last year's corn crop, not the 40% cited in the oped. 2. Ethanol does not receive any government subsidies. Prior to 1/1/12 petroleum refiners and distributors received a credit to buy it, but that credit was transferred to fuel consumers as a decrease in the price of gas at the pump, essentially an offset to the gas tax. On 1/1/12 the gas tax simply went up by 4.5 cents per gallon (10% of 45 cents). Regardless, no one receives a credit or subsidy payment today related to ethanol. 3. Even if the EPA's RFS was gone tomorrow, ethanol demand would remain essentially unchanged. The whole recent debate about dropping the RFS is a red herring. Ethanol contains 113+ octane. We need octane in gas for our engines to run properly. Ethanol is the cheapest, cleanest way to get required octane in gasoline today. If ethanol wasn't used to get octane levels up in gas, petroleum refiners would have to add more aromatics to gas to achieve octane levels instead. Aromatics consist primarily of butane, toulene, and xylene (BTX). These other octane alternatives are 50 to 80 cents per gallon more expensive than ethanol (without subsidization). Thus ethanol would be used at current volumes if the RFS was gone anyway because ethanol is valued and wanted on its own functional merits. More importantly to WSJ readers, the BTX aromatic chemicals are the dirtiest, most polluting compounds in a gallon of gas. The EPA knows this, and rightfully recognizes that road fuels make up 70% plus of all air pollution and that minimizing aromatics is the best way to have the most impact on air quality - far better than regulating factory smoke stacks. Plus petroleum refiners reduce their costs to produce their 90% share of the gasoline gallon by not needing to add as much BTX. They use ethanol instead, which has consistently been 25 cents to 1 dollar cheaper than petroleum gasoline. Studies recently concluded that ethanol has reduced the price of gasoline by $1.09 per gallon between being cheaper than petroleum and adding to supplies driving down the overall price. 4. The price of grain isn't anywhere near the biggest contributor to higher food prices. Packaging, transportation, and marketing drive food costs many multiples more than the price of grain. Ever think about how little food is in all that packaging you bought at the store? 5. Ethanol is renewable and we are able to produce it domestically. It amazes me that so many people would rather send their money to the middle east rather than to midwest America. If the midwest proclaimed a desire to avoid buying Hollywood entertainment and financial services based out of the northeast, there would be outrage. 6. If you don't like mandates and subsidies than why don't you write opeds about the sugar tariff? It drives up the price of all sugar based products in the U.S. driving up consumer costs and hindering jobs. It also results in a lot of corn being used to make high fructose corn syrup. Do you think making high fructose corn syrup is classified as a nutritious food source? I doubt it. Where is the outrage over the suguar tariff and using corn to make soda pop and candy when it could be sent to feed the starving?"

I believe point #3 is spot on.. some of these other Octane enhancers are carcinogenic.. so there REALLY IS A ROLE for ethanol to play in our nation's fuel supply.. IT IS cheaper.. as well as a superior product that is often overlooked in the statistic's..  Note this graph..

http://i.bnet.com/blogs/us-oil-and-other-liquids-production-tverberg.png

see the green "other liquids" contribution to our nations DOMESTIC Energy production.. most of that is ETHANOL.. and it's a pretty significant chunk now.. as we are finding out with a shorter corn crop.

Again.. this article.. touches on some of the things that go into the soup of making gasoline..

http://www.getreallist.com/fuel-to-byrne.html

"How do we come up with 9 million b/d of production when we are only pumping about 6.2'ish of Crude?"

a) some of it is refining gain.. b) Natural gas to liquids.. with some pretty NASTY Cancer concerns.. as well as c) the CONTRIBUTION of ETHANOL.. which is CLEAN AND RENEWABLE at around 900 k b/d

I'm running out of time here before church so will need to sign off and pick it back up later..

Ray brings some important and valid concerns.. Real Concerns..   IMHO we need to search through the weeds.. discover the solid ground that we truely stand on.. seek political Compromises that help us achieve the goals that we jointly want which are..

Domestic reliance upon our own resources.. without starving people.. nor relying too much on the taxpayer.  It can be done.. we just need to stay engaged and "work the problem."

Again I would probably argue that it is in our best interest to maybe idle down the ethanol grind.. come out with a Set Aside based on production capacity.. print RIN's to meet the mandate.. take care of those ahead of the fuel.. livestock, guys like Ray.. etc.. exports.. THEN when we bounce back.. we can open the production throttle back up..

"IF" done correctly.. a set aside in production would RAISE MARGINS so that etoh producers would actually be BETTER OFF.. although on a smaller volume.. it could work..and I believe BEING PRO-ACTIVE.. do it while we have a say.. will be FAR BETTER than trying to pick up the pieces AFTER someone else has "FIXED IT."

jmho.. "I could be wrong."

later.
Now that being said.. there's still some bumps in the road as Ray points out above..

"always something.."

edit: I don't have time to clean this post up.. sorry for the SHOUTING.. uhum.. but that is what I want to emphasize.. I'll clean it up maybe later.. anywho you get my point.. (and I'm not INTENTIONALLY shouting.. or upset.. just trying to draw that out..)

LATER..