TMFTheSnake (< 20)

Not for Consumption

July 04, 2010 – Comments (2) | RELATED TICKERS: MON , SYT , POT

One of the reasons given for the major spike in food prices in 2007 and 2008 was the rise in ethanol production. Farmland can only be used for one crop at a time, so when corn grown for ethanol production crowds out other grains intended for eating, you get a drop in food supplies and rising prices.

I've never been a real fan of ethanol, especially corn ethanol, and the subsidies the industry gets here in the US are even more disturbing. There is a short article on it in this week's Economist which got me a little riled on this Independence Day, so I'm going to share it.

http://www.economist.com/node/16492491?story_id=16492491

Further on in the issue, there is an article about the rising commercial success of biotechnology - using plant matter as a substitute for oil.

http://www.economist.com/node/16492601?story_id=16492601

I like this idea much more than ethanol, but we run into the same problems of farmland being used to produce something other than food. As farmland is already relatively scarce and damage to water supplies is reducing it, the unintended consequences of "green" plastics are likely to be revealed in a few years' time.

Looking at companies like Monsanto (NYSE: MON), Syngenta (NYSE: SYT), Potash Corp (NYSE: POT), etc. might not be a bad idea to prepare for the approaching age of higher food prices.