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Food price not related to ethanol
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Oliver1
Posted 11/24/2012 19:16 (#2714737 - in reply to #2712489)
Subject: Re: Food price not related to ethanol



Alton, Ia


The "sudden policy change" that happened in the last 10 years was when the RFS was passed in 2006, mandating a market, regardless of economics. There is a direct correlation to that law, and the run up in grain prices, land values, and growth in the ethanol industry. An artificial demand was created, I say artificial because a new market was mandated, not created by economic forces. Now that there is discussion about amending the RFS, uh oh... we better not have any "sudden policy changes......."

Ross made a very valid point several weeks ago about global grain supplies. His point was that gov't intervention, mainly subsidized crop insurance, has actually DECREASED the amount of global grain produced. Due to the artificial demand mentioned above, and crop insurance priced BELOW the actuarially determined cost, the corn acres have exploded out of normal corn country, and/or marginal ground is now in corn production. The true risk of planting corn vs. traditional wheat is not borne by the farmer, and the reward is greater, so corn is planted where it shouldn't, at the expense of hay, wheat, barley, etc. Great idea, until drought, wet, late frost, early freeze, etc. No problem, just collect the indemnity and plant again next year.......

So all the talk about gov't programs stabilizing grain production is inaccurate. Reducing consequences rewards risky behavior.

Many livestock people are in the "world of hurt" claimed. They may not show it because if you're gonna survive in livestock, you know better than to overbid for new stock, overpay for iron, and overextend the credit. They have to survive without the gov't "safety net". But the weather did cause issues.

The US $ is low right now, true, but not because of our economy. It's low because geniuses in DC keep spending more of it than we have. It would be really low if it weren't the best crappy old mare in the rundown stable that is our world finances right now.

Saying that we can invent an industry that removes some portion, even .1%, of a commodity from the "pipeline", and claim that it had NO impact on supply and demand, that just plain makes NO sense. Ethanol had a huge impact on the entire global feed grain picture, not just local basis.  Removing some portion of the corn for fuel production has slowly affected crop rotations, feed rations, etc.  But SOME portion IS removed from the "traditional" pipeline. That is a fact, regardless how many studies the RFA wants to commission. 

If mandating usage is so great, in terms of stable grain supplies, thus keeping production up and grain prices low, then how come the ethanol lobby isn't pushing for a meat mandate?  10% of all grocery purchases MUST be meat, whether the consumer likes it or not.  Sounds fair to me....

As long as we allow trade, there is no "excess" grain.  There is merely some grain that international buyers are willing to pay more for than domestic buyers.  Much of that grain goes for livestock feed in foreign countries.  If you want to discuss "destabilizing local economies", sit down sometime and figure out how many jobs are actually created by an ethanol plant, and how many would/could have been created by feeding those 100 mil bu. per year to livestock.  Many, many, more.  Our local economies would have been far better served by developing strong global meat trading partners than by subsidizing ethanol.

I'd love to dissect this further, but I need to get to town and back before ND kickoff... :)




Edited by Oliver1 11/25/2012 05:48
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