Cheaper ethanol....

Looks like the world grain markets are headed towards lower prices

https://www.bloomberg.com/news/arti...lash-is-coming-as-u-s-brazil-farmers-face-off

36654 said:

Looks like the world grain markets are headed towards lower prices

https://www.bloomberg.com/news/arti...lash-is-coming-as-u-s-brazil-farmers-face-off

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Perhaps the funds that went long did so after reading the reports of drought this summer across the upper Great Plains?

DG

Well, it is the corn market that influences fuel and not grain, but the corn ethanol fuel scheme is one of the biggest government boondoggles of all time. If the corn market prices drop, it would not surprise me if the government simply increased the subsidy making the net cost the same. A 2010 study by the Environmental Working Group estimated that the cumulative ethanol subsidies between 2005 and 2009 were $17 billion. The same study estimated the future cost to taxpayers at $53.59 billion if these tax credits were extended until 2015.

Brazil is more than five times more efficient in net energy production using sugar cane.

beemerphile said:

Brazil is more than five times more efficient in net energy production using sugar cane.

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That's beside the point. The price of corn is going down on the international market and midwestern states are dependent on that income. Ethanol will only get cheaper and the economies of the midwest will need to be protected.

The cost of corn may get cheaper, but I'd be very surprised if gas prices drop. The cheaper corn means more money in ethanol producers pockets.

I know I'm cynical, or am I a realist?

36654 said:

That's beside the point. The price of corn is going down on the international market and midwestern states are dependent on that income. Ethanol will only get cheaper and the economies of the midwest will need to be protected.

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Why? Huge swaths of corn country voted en masse for the prospect of smaller government and an unfettered "invisible hand". It may be time to let that play out and allow the economics to remove from production some of the marginal land being tilled in search of subsidy payments, or to return that land to the production of a wider range of *food* products instead of a near-monoculture of corn for ethanol production. It would also relieve the artificial bubble that has developed in land prices. As a country, we initially engaged in crop subsidies for the purposes of maintaining a cheap food supply, for *discouraging* excess single-crop production, preserving soil and habitat quality (ala Soil Bank, CRP, etc), and to a more limited extent the diplomatic use of foodstuffs (remember the "Food for Peace" program?). The misuse of subsidies, whose payment requires the dreaded "T" word, has created an artificial economy whose continued existence requires more gummint, more taxes, and more direct meddling in the decision-making of ag operators, and that is the exact opposite of what they asked for. On top of that, removing subsidies for corn/alcohol production and allowing the resultant cost of ethanol-fuel to reach its natural level would do wonders for the environment. Probably be a good thing for our vehicle engines, too...

(s) Devil's Advocate