[MuskyHunter]

I was watching a regular program on PBS this morning called Market to Market. The discussion of agriculture futures often addresses the topic of the ethanol market as it relates to the market.

Current demand for corn has the market up to over $4.00/bushel. What is the current impact? The obvious answer is that the demand for ethanol is directly responsible for this upward price movement and as a result, is shorting the supply of corn for feed and food. In order to satisfy current corn demand for food and ethanol production while maintaining current pricing, an additional 10 million acres of corn production is needed to meet those demands.

We think of corn as a food that humans consume, which is a smaller market as livestock feed is a much larger segment. The impact of $4.00 bushel corn is that the livestock market is not set up to be able to absorb the higher cost of feed for cattle, hogs, and poultry. Many producers have reduced the number of feeder cattle as margins are much lower as the cost of feed continues to increase. Ethanol production is directly impacting the cattle market and is projected to continue a downward shift in output as feed prices continue to cut into margin until feed pricing reverses to gring back that margin.

The projected effect of this trend is the reduction of USDA choice meat (beef, pork chicken) in the market place, with lower supply and high demand or higher cost. A projected increase of USDA "select" grade meat means lower grades of meat offered to the consumer, yet higher priced due as this grade attempts to meet the needs of "choice" meat consumers. The other impact is increased importation of beef from sources such as Canada and other countries, bringing us back to the "mad cow" concerns from years ago.

As for bio diesel and soy production, in order to maintain the price levels for soy, demand for soy for fuel production at today's levels requires that soy production be increased by 15 million acres, which will likely go to Brazil for this kind of output.

Production of food from corn products are beginning to see negative margin impact as the cost of production increases due to higher feed costs. The markets effected by soy pricing are already in the negative margin area, causing a lot of problems for producers to continue to produce soy for food and feed, as the positive margin is in the fuel market.

I know from my previous threads on Ethanol I have not been a proponent of food for fuel production. If we continue to believe that ethanol and bio diesel is our solution to less dependence on foreign oil, we are sadly misguided as are many "green" proponents and many of our idiot elected officials, who see ethanol production as an emerging market and another source of tax revenue.

Again, if every single cob of corn that is produced in the US is sold off to produce ethanol, we would be able to supply about 10-15% of our daily energy needs at the cost of poor grade meats and higher cost, increased ground water contamination from pesticide use to grow our crops, and substantial soil erosion problems degrading our quality of tillable acreage.

Lastly, compound this problem with the fluctuating output due to drought, floods, hail, and other factors in the production cycle, realizing high volatility and greater economic impact to consumers outside of the direct cost of fuel. This whole notion to use primary food sources is assanine. The use of secondary waste products is a more "green" approach to fuel production and is a technology that needs to be improved in order to yield higher output and lower its cost for fuel production.

What can we do about this problem?

1. Voice your concerns to your elected representatives.
2. Do not buy blended fuels if possible. If the pump says "contains 10% ethanol, make a note not to patronize that station and tell them why
3. Use opportunities to discourage others of the preceived value of increased ethanol production for fuel.

Until we have another source of energy that is more viable, the sad truth is that we are dependant on oil, period. To address foriegn dependance we have to increase domestic output or continue to import. Ethanol has hidden environmental impacts and complex cost relationships to consumers.