Table of Contents:
- Ethanol versus big oil is confusing at best
- David and Goliath
• I’m in favor of keeping grain prices high enough for farmers to recoup some of their losses from drought and even back to when grain prices weren’t so good.
• However, it would be nice to keep prices low enough and for long enough to prevent driving the livestock industry out of the Southeast.
If ethanol production sounds like big business, consider the entire U.S. ethanol industry is smaller than Mobile-Exxon, and with significantly fewer resources. Throw in BP and other major oil companies, and it’s easy to see who is David and who is Goliath.
The latest report from the Alternative Energy Association sounds like a good thing for livestock growers. Midwest ethanol plants did indeed produce a lot of DDGS (distiller grain from corn production of ethanol).
The latest report from the ethanol folks says, “On the co-products side, ethanol producers were using 12.206 million bushels of corn to produce ethanol and 89,840 metric tons of livestock feed, 80,093 metric tons of which were distillers grains. The rest is comprised of corn gluten feed and corn gluten meal. Additionally, ethanol producers were providing 4.19 million pounds of corn oil daily.
In the grain deficit Southeast, an additional 90 million tons of livestock feed sounds real good. Real good, that is, until you factor in the cost of getting DDGS to the Southeast and their relative value nutritionally compared to the real thing — corn.
Farmers in the Southeast are heading into the planting season, and some are already there, with more questions about what is most economically promising to plant that at any time recent history, made in all history. For those contemplating corn acres and think the recent dip in price is a strong signal to cut back on corn acreage, consider the market.
American consumers use about 350 million gallons of gasoline a day. As long as the current Federal mandate is in place, ethanol must supply 15 percent of the total amount of gasoline used for transportation. Currently ethanol produces about 9.5 percent of the daily demand.
Unless big oil succeeds in taking down the ethanol mandate, the market for ethanol is going to remain good, hence the demand for corn should remain good and so should the price. If the Federal mandate goes away, and there are some legitimate reasons it should, then all bets are off on corn prices.
What impact does the standoff between ethanol and big oil have on the U.S. congress? One would hope none, but reality seems slanted in an all together different direction.
Corn is big business, and not just big agriculture business in the Midwest. It’s a safe bet that regional alliances, regardless of party affiliation has some negative impact on the ongoing congressional gridlock that currently frustrates a high percentage of tax-paying Americans.
It would be nice if the U.S. Congress could stand together on some important issue — like our food supply, but it’s not likely to happen.
Perhaps Walt Kelly, author of the comic strip Pogo, had the cause of the current political gridlock in Washington D.C. figured out long age. He wrote in the popular cartoon strip, “We have met the enemy and he is us.”
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