Enes K.

Ethanol Is Dead: How You Can Still Profit From It

actually, i'm a big ethanol lover. i just prefer honesty in business and government. the manipulation is incredible. ethanol has some nice properties as a fuel, but its transportation limits its use on a national scale (for now). do i like the national mandate on ethanol? no. do i mind and hate ethanol? no. it has a place especially in the midwest. it is a great octane booster. does ethanol make sense at these prices? yes. are the blenders getting some extra cash that they do not need right now? yes.

its impact on food prices is indirect. and that is the main problem. there is sooo much information that people do not know what to do with or believe. for example, cattle need starch, but the current movement is into lean muscle cattle ("healthy" alternative). dairy operations also care very little about starch and concentrate on getting protein and hormones to their milking cows. so how do you price corn? how do you quantify its impact on the price of rice which is a people only food? does corn impact rice? can the situation in india be explained using the same logic (export of rice is practically eliminated)?

the ag lobbies represent ag business interest and farmers, especially medium and small, are left out of the loop. most of the corn increase has benefited the suppliers. as proof, we need to look at fertilizer, machinery, and seed companies and the prices they charge. they are all doing GREAT.

the rest were bought out. the oil companies and their lobbies got a slice of the pie with the blender credit (which at current relative levels does not make sense). farmers are left in the middle and do not like what is going on. will they take higher corn prices? yes, but only to a certain extent. the input prices have gone to such levels that they are starting to switch to soybeans.

i think the increase in corn prices is more related to the dollar and the world increase in GDP. do we expect people to always eat rice and beans while the developed world eats $0.99 cheeseburgers at McDonald's? i think not. the dollar has lost a large portion of its value while the rest of the world has gotten richer off of commodities, exports, and a horrible budget deficit and management during the bush administration (deficit = imports for the US). now some of these "other" people are able to afford eating more and better food. the highest demand increase for meat products has come from countries that have seen large increases in income, dollar holdings, and rise of a middle class. this would include china, india, brazil, middle east, and russia. we can't use one logic for oil and other commodities and claim that corn prices are strictly affected by ethanol and imply that their increase is controlled by that. all of a sudden the global economy and the dollar have nothing to do with these commodity prices?

take care of the dollar, and it will take care of you. but that won't happen for now (yay bank lobbies).

PS
are the poor going to suffer? they always do during inflationary times. this is no different, but the rich get richer and fatter in those countries. and that is not going to change either (russia to me is still a communist country; as is india; the middle east is truly special; brazil has a boat load of case studies on income inequality).