Corn Prices Discussion, Ethanol Subsidies vs Global Warming.
Jan 18th 2011, tmfdeej -
The current bullish outlook for record high grain prices is primarily the result of actions by the U.S. Congress. The tax legislation enacted by Congress in December to extend the Bush tax cuts included an amendment by Senator Grassley of Iowa to continue federal subsidies for ethanol i.e. the 45 cent per gallon blenders' tax credit for gasoline companies which buy and use ethanol. The tax bill also extended the 54 cent tariff on ethanol imports from Brazil. The end result of these extensions is more demand for ethanol and no competition from Brazil.
Approximately 41% of this year's entire U.S. corn crop is being diverted to the production of fuel ethanol thanks to legislation passed by Congress. On the Global stage 50% of the Brazilian sugar cane crop is being used to produce fuel ethanol. It is no wonder the price of agricultural commodities and the price of food are headed higher.
As of 1/17/11, corn was trading for $6.4875/bushel. This price will likely have to head higher in order to convince enough farmers to switch their plantings to corn, which will be necessary to meet the current demand for it for ethanol production. The challenge, of course, is that given the record demand for soybeans from China, soybeans cannot afford to give up millions acres to corn. As corn trades higher, so will soybeans.
The experts who I have spoken with fully expect corn to trade over $7 a bushel within the next 60 days. They won't rule out seeing a real blow out in prices this spring whereby the price of corn exceeds $8. Soybean prices are expected to trade higher in tandem with corn which would add another $1 or more to soybean prices.
( I included these two for an example of the ABC's of bashing Government. (Always Blame Congress)
#4) On January 18, 2011 at 6:00 PM, ChrisGraley (99.52) wrote:
Good Catch Deej!
#9) On January 24, 2011 at 1:32 PM, JakilaTheHun (99.93) wrote:
Great article, Deej.
Jan 13th 2011 tmfdeej -
As a result of government mandates and subsidies, the production of ethanol now consumers a staggering 41% of the U.S. corn crop. Ethanol increases the demand for corn, which in turn drives up prices in a world with a finite amount of land. The impact is not just limited to corn prices. As corn prices increase, more land is shifted towards planting it. That leaves less land for other commodities. This means that food prices are headed higher, perhaps significantly higher for consumers. That's the bad news.
1/30/2011, devoish - Last year I went long - only in CAPS - JJG and JJA not because of the influence of biofuels on crop prices, but because of the influence of global warming induced weather extremes on crop production. Austraila was crushed by drought and then trashed by floods, Russia was destroyed by heat and drought, Argentina - drought, Pakistan - flooding. All of that weather could be just weather, just as four major hurricanes hitting Florida could be just weather. But the more "just weather" events there are, whether they are record precipitation, highest ever temps, or number of hurricanes, the more likely global warming is coming to pass. Whether you believe in global warming or not, it is the extreme weather events, + increased food demand + increased oil costs = higher food prices. Ethanol has kept costs down.
Steven (who has since learned to stay away from etf's)
Dec 23, 2011, greencarreports.
When the U.S. Congress adjourned for the holidays on Friday, December 23, its departure sealed the fate of subsidized ethanol production.
During its session, the Congress did not renew a tax break for U.S. production of corn-based ethanol that had become increasingly unpopular across a wide area of the political spectrum.
The tax credit amounted to 45 cents per gallon of ethanol that was blended into gasoline. It had been in place since 1980.
Todays corn price is $7.12/bushel. The price is driven by market speculation concerning crop failures due to heat and drought in the US corn belt, not a government ethanol subsidy.