Free Republic
Browse · Search
News/Activism
Topics · Post Article

Skip to comments.

Fuel or folly? Ethanol and the law of unintended consequences
SFGATE ^ | Wednesday, April 2, 2008 | Cinnamon Stillwell

Posted on 04/05/2008 8:46:00 AM PDT by Dan Evans

In the pantheon of well-intentioned governmental policies gone awry, massive ethanol biofuel production may go down as one of the biggest blunders in history. An unholy alliance of environmentalists, agribusiness, biofuel corporations and politicians has been touting ethanol as the cure to all our environmental ills, when in fact it may be doing more harm than good. An array of unintended consequences is wreaking havoc on the economy, food production and, perhaps most ironically, the environment.

In the United States, ethanol is the primary focus and, as a result, corn growers and ethanol producers are subsidized heavily by the government

But it turns out that the use of food for fuel is wrought with difficulties. Corn, or some derivative thereof, is a common ingredient in a variety of packaged food products. So it's only natural that, as it becomes a rarer commodity due to the conflicting demands of biofuel production, the prices of those products will go up. The prices of food products containing barley and wheat are also on the rise as farmers switch to growing subsidized corn crops. During a time of economic instability, the last thing Americans need is higher prices at the grocery store, but that's exactly what they're getting.

(Excerpt) Read more at sfgate.com ...


TOPICS: Culture/Society
KEYWORDS: biofuels; energy; ethanol
Navigation: use the links below to view more comments.
first previous 1-2021-4041-56 last
To: Conservative Vermont Vet
Remember that he DID attempt to get an energy bill passed, but drilling in Anwar was blocked in the Senate by most Democrats and some Republicans. He also tried to do something about Social Security and the Democrats were so proud that they defeated him on it that they stood up and applauded their actions during the State of the Union. He has held firm on the WOT and has placed two excellent conservative judges on the SCOTUS.

I also voted for him twice and am proud to have done so. I have not agreed with him on everything, but I would vote for him again in a heartbeat. He has taken more verbal abuse and ridicule than any other politician in my memory. I think that history will one day be much kinder to him and his presidency than his critics and the pundits are today.
41 posted on 04/05/2008 7:44:42 PM PDT by srmorton (Choose life!)
[ Post Reply | Private Reply | To 10 | View Replies]

To: Dan Evans

Biofuels have become such a disaster the greens are now disavowing that they had anything to do with it.

If you didn’t see it, you wouldn’t believe it.

And their junk science and willingness to immediately implement policy which profoundly impacts the economy (people’s lives) pervades every belief they have.


42 posted on 04/05/2008 9:05:53 PM PDT by TFMcGuire (Either you are an American, or you are a liberal)
[ Post Reply | Private Reply | To 2 | View Replies]

To: Dan Evans

Well we’ll try again.. Right, it is demand, and the
greedy speculators have poured so much money into farm commodities and promoted so many excuses, and rumors,
to keep driving prices up. One rumor is that their
will be a huge cut in acreage when in reality it will
still be 9% more than 06.But those reports don’t bear out
what farmers are doing here. They’ve created an
artificial demand, just like middlemen.

But even corn, a bushel of corn, going from
3 bucks to 6 bucks isn’t the reason that middlemen getting 200 bucks, went to 300 and heading for 400, GREED is the reason. There is no shortage, we are still exporting,
there is surplus corn products still going to food
pantries.

You all holler about what it it costs to grow, but that is going to be spent anyway, for whatever raised on the land.
We produce 400,ooo barrels ethanol per day, plus
same process makes cattle feed, etc, And other products
bring as much money as ethanol. That many barrels
is 25-30 billion we don’t have to pay nutcakes.

You holler about subsidies.There is no subsidy for
corn, no price supports. Big oil gets a blending
tax credit of 3 billion a year.But they get 30-40 times
that much in oil tax breaks/credits from the tax code.

You complain gov mandated use, Oxygen carriers are mandated
to make cleaner burning and help cut air pollution.
Which it does, where used in place of other ones that are
poisons, cancer causing and pollutes the water.
And right now ethanol is about a buck per gal less than pump price, so it is helping to keep prices down where it is blended 10% for oxygenation. All my V8s run better on the 10% blend.

Farmers for years spent $2.50 per acre to raise corn and got 2 bucks, now with energy dring up costs they
spend $ 3.50 and over the last year got $4. They
are a viable operation now not needing supports, buts
a lot of these farm bashing articles are promoted
by greenies who don’t want farms strong, don’t want land
out of CRP and back into farming. Like 30 million
acres and going down. That is a huge part of farm bill
paying not to farm 30 million acres, and food stamps are
another huge part of farm bill, but the liers lump it
all as a subsidy for ethanol. If that land was back in
we could have ethabol 10% in all gas, and 10% more
of wheat, soybeans, and hay. All of these crazy
articles and rumors and you crazy reaction to
them plays into the hands of speculators and middlemen
making prices worse........Ed


43 posted on 04/05/2008 11:22:54 PM PDT by hubel458
[ Post Reply | Private Reply | To 40 | View Replies]

To: hubel458
They’ve created an artificial demand, just like middlemen.

You got that exactly right. The artificial demand is government mandated ethanol requirements in gasoline. If it were simply speculation, then grain would be overflowing the silos as speculators bought grain that they cannot sell. Instead grain is being sent to ethanol plants to be burned as fuel.

There is no way in the world that ethanol would be used for fuel in cars if it weren't for government subsidies, tax credits or mandates. That's because it makes no sense economically.

44 posted on 04/06/2008 8:04:19 AM PDT by Dan Evans
[ Post Reply | Private Reply | To 43 | View Replies]

To: Dan Evans

There is only a tax credit for big oil and that should be
gone.Farmers get none of that. The gov mandate is
for oxygenators and we need them for cleaner emissions
to help cut air polution. My cars run great on 10%
blend, the V8s getting an extra mile per gal.
The other oxygenators cost more and big oil uses
them, and they are cancer causing. About speculators-
What they’re doing is buying and selling for quick profit, and they are drawing in more investors with
rumors, etc, of always greater shortages and rising prices.
Relative to money in oil or gold speculating, corn is
small volumne and the extra push of money has geometric
affect on prices. Reason- we have about 13-15 billion
bushels of corn a year, where say in oil we have that
many gallons in 12 days, so the speculation pressure
affects corn so much more, as it is relatively small
compared to oil, gold, bonds,etc. The speculators don’t
buy grain to sell to ethanol plants, or food processors,
they just buy a block of it to sell to the next speculator,
for quick profit,and the actual processor forced to pay
someone in actual physical control the price set by
the speculators. And at no time, so far, has there been
a shortage of corn, for the board of trade to have, to
put up blocks of it to speculate on. Think about it.....
they haven’t run out of any to speculate on.......
so there is no shortages....just prices driven up by
a lot more money speculating......Ed.


45 posted on 04/06/2008 9:25:27 AM PDT by hubel458
[ Post Reply | Private Reply | To 44 | View Replies]

To: hubel458
Think about it..... they haven’t run out of any to speculate on....... so there is no shortages....just prices driven up by a lot more money speculating......Ed.

That's what a futures market does, it guarantees that there will be no shortages or surpluses. The price for that is fluctuations in price. That's one reason why you could buy gasoline for 99 cents a gallon ten years ago and why it is so expensive today.

Grain prices have increased because of the huge demand for grain. If a large fraction of the grain is diverted for fuel, there is no other result you could expect than price increases.

Look at it this way. If 5% of our wheat acreage were used for fuel crops then 5% fewer loaves of bread can be made. The only way you can avoid shortages is to raise the price of bread. If the price elasticity of demand for bread is .15 then the price of bread has to increase by 33 percent for supply to meet demand (5%/.15). It has nothing to do with the cost of grain as a percentage of the selling price.

If the car companies can't buy ball bearings at any price then they can't make any cars. The price of new cars goes through the roof even though ball bearings are a tiny percentage of the price of cars.

By they way, I just saw an estimate the 28% of our corn harvest be needed to supply all the ethanol refineries that are being built.

46 posted on 04/06/2008 7:22:02 PM PDT by Dan Evans
[ Post Reply | Private Reply | To 45 | View Replies]

To: Dan Evans

But Dan in 6 years we have increased acreage and production
to cover that 28% going into ethanol, actually more than
cover it. Example, 2006 to 2007 acreage went up 15%, and
the no-till, roundup resistant corn has raised yields
here over 25% in last 6 years. And most farmland coming
out of the stupid CRP is going into crops, not being
signed up again. Mexican farmers are getting back into
corn production that they had stopped due to us
dumping cheap corn on them. They even sued us in WTO
for it. Cotton is in surplus and part of our corn acreage
came from cotton acres, and we were for years sued
by African cotton groers for dumping on them. There still
still is surplus but African growrers are getting back into it as price helps them now. We are talking about
million farmers in Africa now able to make few pennies
on cotton instead of being undercut. The futures market
is just an overheated monster with way to much money relative to it real value that the customer can stand,
pushing prices crazy. And you know combine makers join
right in, so that next years models will be $500,000
instead of 250,000.. And same for all other farm inputs,
and farmers are shafted.And when speculators go to something else, farmers will have to raise so more to make payments...Ed


47 posted on 04/06/2008 9:20:34 PM PDT by hubel458
[ Post Reply | Private Reply | To 46 | View Replies]

To: Donald Rumsfeld Fan
Subsea completion module... isn't that what The Abyss was all about?
48 posted on 04/06/2008 9:26:25 PM PDT by txhurl
[ Post Reply | Private Reply | To 19 | View Replies]

To: Dan Evans

What makes the author think the consequences were unintended?


49 posted on 04/06/2008 9:27:21 PM PDT by hedgetrimmer (I'm a billionaire! Thanks WTO and the "free trade" system!--Hu Jintao top 10 worst dictators)
[ Post Reply | Private Reply | To 1 | View Replies]

To: hubel458
But Dan in 6 years we have increased acreage and production to cover that 28% going into ethanol, actually more than cover it.

But not enough to keep prices down. We are also increasing exports, up about 27 percent since the ethanol insanity began. The rest of the world is just as crazy as our politicians are. That's why there are food shortages and prices skyrocketing everywhere. We are burning food.

If it were caused by speculators bidding up the prices in the absence of a demand then you would see huge surpluses because no one would be buying the excess. But that isn't the case. The grain is being burned.

And you know combine makers join right in, so that next years models will be $500,000 instead of 250,000.

Why do think the farmers are being shafted? If the demand for farm equipment increases, shouldn't you expect the price to increase? The manufacturers have limited capacity and they can't build new plants overnight. If supply is to meet demand then the price has to rise. You look for villains in all the wrong places. The problem is in the statehouses and in Congress.

When this bubble bursts, when people realize how stupid it is to try to use food for fuel, farmers are going to be hit so hard you won't believe it when prices drop like a stone.

50 posted on 04/07/2008 7:44:03 AM PDT by Dan Evans
[ Post Reply | Private Reply | To 47 | View Replies]

To: Dan Evans

I know prices will drop like astone but it isn’t the fault
of ethanol, it will be because speculators went elsewhere.
And we increased production to cover the extra exports also. I see the elevators and corn bins setting
around half full, enough to meet needs till
fall harvest. There is no shortage.. And farmers are
not going out and buying new combines just because of
a price bubble, but just as needed replacements at
a fairly steady level, same as before, replacing
worn out ones. But CEO syndrome in farm supply/middlemen
business says we get 250,000 for combine at 3 dollar
corn and 500,000 at 6 dollar corn. When corn takes a hit
will that come down, I doubt it. But it ain’t the fault
producing more corn for whatever use, it is speculators
screwing up the system. But if corn takes a hit
like back to 2 bucks the ethanol use will jump, farmers do
more to pay bills, and whatever shortfalls farm has between
cost, low price, back to price supports.Then hear bitching,
and even if you stopped ethanol the price is lower yet,
needing more price supports. This whole beating on ethanol bit is people thinking we are going to starve, so
when farm stuff crashes, they can’t let no farm fail,
so price supports. They get cheap food, and the 15%
to pay 80% of the taxes prop up farms so all those thinking they are poor/starving get good food prices.
Hell of a way to run a railroad as old
timers used to say..ED


51 posted on 04/07/2008 10:15:05 AM PDT by hubel458
[ Post Reply | Private Reply | To 50 | View Replies]

To: hubel458
There is no shortage..

Of course not. In a free market, supply meets demand. The demand for farm equipment is up because, as you pointed out, farmers have more cash now because farm income is up this year. Not only that, but the dollar is down, making US products cheaper and so foreign sales are way up.

"Farm equipment exports to South America grew 46 percent in 2007, with purchases totaling $689 million dollars. Africa took delivery of $247 million dollars worth of American-made agricultural equipment in 2007, a gain of 28 percent, and exports to Europe increased 24 percent and totaled $3.3 billion dollars."

http://news.thomasnet.com/companystory/540944

I don't understand what you want to do with the futures market. Abolish it? Or just use it as an excuse for the problems of farmers.

52 posted on 04/07/2008 12:29:34 PM PDT by Dan Evans
[ Post Reply | Private Reply | To 51 | View Replies]

To: Dan Evans

Dan— All that needs done with futures and options
is force speculators to put in more, IE risk more
instead of small percentage they do now. Same for oil.
If that was done, oil and corn would drop.You give
investment firm 100 bucks, by the rules they hold
15% I think for reserves, invest the rest(85) only having
to put up 15% I heard in speculating, so the hundred
dollars you put in causes about 600 dollars worth of
speculating. So little in the pot, speculators
are reckless only wanting to be the next to the
last holder when it goes down.. Reckless gamblers..
Congress makes investment rules and aren’t doing the job.
And the way the rumors are flying it wouldn’t
surprise me to see corn at 10 bucks. Not good at all.
As people/politicians will crucify farmers....Ed


53 posted on 04/07/2008 8:21:13 PM PDT by hubel458
[ Post Reply | Private Reply | To 52 | View Replies]

To: hubel458

I don’t see how you can blame this on the speculators. The futures market is made of thousands of investors each trying to predict supply and demand. If they are wrong either way, they lose money. So they all have an encentive to guess right.

Crop prices and food prices are high because the world is using crops for fuel.


54 posted on 04/08/2008 8:35:09 AM PDT by Dan Evans
[ Post Reply | Private Reply | To 53 | View Replies]

To: Dan Evans

Well lets think ahead. Speculators pull back. corn drops, wheat and everything else drops..Just what we want.
In ag prices they always swing too much so they will be
to low putting farmers in a bind. But they been there before. But the guy who posted his weekly food bill
went up 30 bucks blaming ethanol will see his bill go
back down, probably 40 bucks. As always happens
the price will be hammered down by gov because they want the vote of that grocery buyer.Middleman saving on his
purchases now that corn, etc dropped will do ok.
Grocery buyer is happy, not bitching......BUT cheap
corn means ethanol production will double in couple years
but consumer is happy not blaming ethanol any more, even though refining of it went up.Farmers at cheap price got
do as much as possible to get cost of production paid.
You see the paradox- it ain’t ethanol— it is the speculating on prices of farm output, whether the prices
actually affect grocies or is an excuse to jack up
grocery prices. Corn crashing fine with me, as ethanol
will double which I want blended 10% in all my gas.
consumers happy not blaming ethanol, farmers will
get supports to be able to raise it.Whoopee.Ed


55 posted on 04/08/2008 10:39:06 AM PDT by hubel458
[ Post Reply | Private Reply | To 54 | View Replies]

To: hubel458

I know my post sounds cynical and it is.
But that is my reaction to all that is going
to happen to farms. When things go bust for
them it is great for everyone else. Only consolation
is when it goes bust cheap corn acreage will
have been added, less land in stupid CRP, and
much more ethanol helping gas supplies and
helping to cut emissions. But it is a shame there
can’t be a balance in prices. But there can be no
balance with to much speculating money, jacking up
the prices, as when corrections occur prices
go too low. Makes one cynical..Ed


56 posted on 04/09/2008 9:56:15 AM PDT by hubel458
[ Post Reply | Private Reply | To 55 | View Replies]


Navigation: use the links below to view more comments.
first previous 1-2021-4041-56 last

Disclaimer: Opinions posted on Free Republic are those of the individual posters and do not necessarily represent the opinion of Free Republic or its management. All materials posted herein are protected by copyright law and the exemption for fair use of copyrighted works.

Free Republic
Browse · Search
News/Activism
Topics · Post Article

FreeRepublic, LLC, PO BOX 9771, FRESNO, CA 93794
FreeRepublic.com is powered by software copyright 2000-2008 John Robinson