Minnesota Farmer

Ethanol in today’s news
July 18, 2011, 3:12 pm
Filed under: Biofuels, Corn, ethanol, Farm, food | Tags: , , , , , ,

There were a couple of interesting items in todays news about ethanol.

(FABRI) With the loss of the 45-cent-a-gallon excise tax credit, FAPRI says output would fall, rebound after a year and then grow more slowly in the future. The ethanol market is highly sensitive to prices, and high oil prices have ethanol sales running far above the federal mandate for use of biofuels.

The last sentence is the most interesting to me.  High oil prices have increased ethanol use.  That means that oil companies are not as afraid of ethanol as they claim.  They will use ethanol when ever they can make a buck from its use.  It all comes down to making the most dollars for big oil.

Then there was this.

(Bloomberg) — General Mills Inc. Chief Executive Officer Ken Powell said U.S. ethanol fuel subsidies were causing higher food prices, in turn increasing inflation.

Obviously Mr. Powell has not checked recently to see just how much corn is in the products he sells.  The answer is not much.  Yes, the largest corn user is now the ethanol industry, and yes, corn is a major agricultural commodity, but higher corn prices will only change the price of that box of Corn Flakes a fraction of a cent.  Even at todays higher corn prices, there is still only about 7 cents worth of corn in that box.

The rising corn prices have affected not the price of products in the store, but the bottom line of the livestock farmer.  With rising corn prices the profit moves from the livestock farmer to the crop farmer (sometimes these are the same person).  Livestock producers have seen their profit decrease lately.  You can expect that meat prices will go up when livestock producers start to cut back on flocks and herds.  For now the livestock man is getting squeezed as Mr. Powell and his pals use rising corn prices as a cover to add more money to their own pockets.  Nice try.


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