Farmer Brown here…if no one else is going to tell this story, then I might as well.
We do some stupid stuff here in America – playing ultimate frisbee on skis, deep-frying Oreos, calling in to vote for televised dance show contestants…I could go on and on.
But of all the stupid things we do, one of the most dangerous is this ethanol nonsense, in which we gleefully burn up our corn supplies. For very little in the way of environmental impact I might add.
First, look at the December 2010 corn contract, then I’ll give you some insane stats on the demands of ethanol:
You wouldn’t believe it, but according to the most recent estimate from the USDA, corn use for ethanol for the 2010-2011 corn crop will be 37 percent of the projected total harvest. More than a third of our corn supply will be refined for energy use. We’re talking about 4.7 billion bushels of the corn that would normally go to animals as fodder and to our own diets.
And while yields and production are up, corn races to ever higher prices. There’s a good reason for that – industry experts say that we now need to produce 13 billion bushels each year just to keep prices restrained.
The stats above are mind-blowing and to me they represent the bull case for agriculture stocks and commodities in general.
They also represent a society that has become oblivious to the danger right in front of its face. I believe that resource competition between the developed and emerging nations is a given for the coming decade. While many believe this competition will center around oil, I’d be more concerned about the global demand for more and better food.
One of the most important determinants of animal protein prices is the corn fodder that supports production. And we’re mixing this critical element of the food supply into our gas tanks.
One might ask “but if it comes down to it, we can adjust in time, right?”
And the retort might be “if we’ve learned anything from the economic earthquakes of the recent past, it’s that we almost never adjust until it’s too late.”
Stupid, stupid, stupid.
h/t David D