[Peace-discuss] more on ethanol

[E. Wayne Johnson]

This chart shows the prices received by farmers for corn in Illinois.  
1995 was not a good crop year
and corn prices skyrocketed until a decent harvest in fall of 1996 
restored corn supplies. (We eat in
the following year until fall the crop raised in the previous growing 
season.)  Otherwise
corn prices remained pretty much flat from 1991 through 2005.

Enter ethanol production in a major way in 2007.  Driven by government 
subsidies, ethanol production
can outbid every other demand for grain, not only feeding livestock, but 
feeding of people.

It is not a particularly easy thing to estimate and track the progress 
of a crop growing in the field.   It is
quite likely that we are looking at a corn crop that is comparable to 
that of 1995 (which caused the
price spike in 1996).  The 1996 price spike occurred because there was 
not enough corn to meet the
usual demands of food and feed.  In 2008, we are consuming over 30% of 
the annual crop
for ethanol production.  Superimposing the spike of 1996 (a likely 
scenario) on the rising prices
due to the ethanol craze, one finds interesting times developing.  The 
ethanol train is still in road gear
and it wont slow down noticeably anytime soon even if the government 
subsidy and mandate is killed immediately
this morning, right now, although one could hear a lot of noise and much 
steam expelled as many 39cent politicians
begin to hear from the ethanol barons.

The implications for peace and tranquillity at home and abroad are  
significant.  It is hard for hungry
people and hungry children to be happy and harder yet for them to be 
happy about being unhappy.

The ag industry knows that we are looking a potentially much less than 
good crop for 2008, but the
USDA has issued a very rosy report on 30 June 08 which has basically 
halted speculation in the
corn market by traders and the dec 08 prices that were headed for 
$10/bushel peaked just above 7.50 and
have  settled for the time being at about $7.15.  Most think that the 
report was fallacious as I do but it did
calm the market.

What is the effect of $7.15 corn on food prices?  Everything we eat is 
based on grain at some point.  I
can show the effect on the hog market.  Some are practical or ethical 
lactovo-vegetarians and some are pure
vegans but hopefully you can bear with this analysis which is going to 
be ugly.  It takes about 10 bushels of corn
and 100 pounds of soy to make a pig grow from weaning to market.  That 
part costs $90 per pig at expected prices.
Another $25 to 30 is needed for vitamins, minerals, labor, 
transportation, housing, health care, etc.  Total of
$115 to 120.  The expected market price is $120 when the pig is sold to 
market.  So an efficient producer
makes $5 per head, while an unfortunate one breaks even or loses money?

Not so.  You have to have the weaned pig to feed, right?  It costs about 
$25-30 to make a weaned pig, so every
weaned pig causes a loss of $25-$35.  How does this get fixed?  There is 
only one way, and that is for production
to decrease, and that only happens when farmers are bankrupted or nearly 
so and are forced out of business.  That is
happening right now.

The long term effect of producers being forced out is that prices rise.  
This affects the vegan as well as the carnivore, because
the vegan uses goods and services that are provided by meat eaters, and 
the price of granola and tofu is affected by the price
of grain and the costs of services.

It will take quite a little while to get to full effect but food prices 
and prices of everything affected by food prices will rise.


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