[Peace-discuss] more on ethanol

[n.dahlheim at mchsi.com]

Wayne,
   Don't forget the skyrocketing fuel and fertilizer costs as well... This 
will hit the market hard, too.  And we still haven't even paid the spot 
transactions on the $140 futures---wait for that Christmas present....

Best,
Nick


----------------------  Original Message:  ---------------------
From:    "E. Wayne Johnson" <ewj at pigs.ag>
To:      Peace-discuss <peace-discuss at anti-war.net>
Subject: [Peace-discuss] more on ethanol
Date:    Wed, 9 Jul 2008 22:54:57 +0000

> 
> 
> 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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