Corn Ethanol Economics

Among things to consider in the Linked Article are:
1. If it cost $2.53/gal. to produce ethanol in 2005 it would likely cost more now.
2. The Minnesota taxpayer who has been paying owners $.20/gal.for ethanol production for 22 years [conversion rate; 2.8 gal. ethanol/bu. corn] means they have provided a subsidy of $.56/bu. for that corn. This has the effect of raising the price of all corn that is marketed everywhere.

• LA

Good article

• How long can we ignore food inflation article

When corn was $2.00 a bushel a box of corn flakes was $2.50. The amount of grain in the box had a value of 16 cents.

When corn goes to $4.00 a bushel that value would be 32 cents.

But corn flakes went from $2.50 a box to $4.00 a box.

Who got the other $1.34 of that $1.50 increase?

Cattle and hogs are lower for the farmer this year than last year. But meat is higher at the meat counter this year than last. Where is that money going?

Ethanol is not the only reason for higher food costs.

During that time, they also have reduced their use of energy. I'm not sure how much, but - less that it used to be.

1/3 of the corn they buy ends up resold as a high-protien livestock feed. As corn & beans go up in price, so does this feed they sell.

Ethanol prices have _not_ kept up with crude oil prices, but as crude goes up, ethanol prices also have risen some.

So, I think you would need to look at your first assumption quite a bit - My understanding is the ethanol plants surrounding me are doing fine & returning dollars to the farmer-investors at $6 corn prices.

I think the ethanol industry is changing so rapidly, any 'number' you get from 3 years ago is about worthless - they continue to improve & retrofit & innovate their operations on a monthly basis. Some are working on extracting the oil from the corn to make biodiesel as well as ethanol from the starch, and still have some feed meal left to sell.

Corn prices have gone up because our ecconomy is in the dumpster; the rest of the world is much stronger. Those other countries are suddenly willing to buy a lot more grains, and our devalued dollar makes our grains a bargin to them.

Few years ago here in MN corn was good to get $1.60 a bu. Livestock growers were laughing, saying they would just buy the cheap corn, only a fool would try to grow any for that price....

Well, duh! :)

Folks are really against ag subsidies, even tho only 19% of the 'Farm Bill' money goes to farmers; 60+% goes to food stamps & other poor-people programs, and the rest is administration & oversite programs.

So, farmers here in MN built their own ethanol industry, the govt helped/ continues to help develop the new industry - as the govt does to _any other insudstry out there_, and the farmers are looking out for themselves - what you all told us to do.

Ethanol ecconomics work out real well.

If high food & oil prices have you bothered, look to the fools who bought houses on credit they couldn't afford & inflated & then collapsed the housing market. That messed up our dollar value, which has created high prices of anything we import, and global competition for several things we export.

Where were you when I was trying to make a living on $1.60 corn & wheat was under $3??? Were you living high off the hog at my expense? Did you care back then if I could make a go of it or not? Were you one of those who said farmers shouldn't get any govt money, should just make it on their own & charge what they need for grain?

Well, what goes around comes around. People either pay for what something is worth, or it disappears until they do.

Too many ignored the problems of cheap grain; so now we have high grain prices.

Stick around, it will change again in 5 years. Always does. Farming is a cyclic thing - ups & downs.

Ethanol is small potatoes in the big picture. It's ecconomics work out well.

--->Paul

Grain market has gone the same way oil has.

During the 1990s low crude oil prices destroyed the domestic oil market. Small producers went broke, exploration disappeared and US oil production sagged. After driving out all the small guys’ speculators and OPEC drove up market prices and laughed all the way to the bank.

The same thing has happened to agriculture in the US only it took much longer. The inflated value of the dollar destroyed exports and cheap domestic commodity prices drove millions off the farms. Currently the American farmer is a 65 year old man that's barely made it through the hard times or a corporation. The average age of an individual farmer is 55 and over 30% are 65 or older. The consolidation of food production in the US has been tremendous since the last "good" farming years came to a close with the grain embargo of 1979. Much like the oil companies the big boys are now calling the shots and the bottom line is PROFIT. The consumer is just now starting to pay for 30 years of the world’s cheapest food prices.

As for who benefits from ethanol: Every dollar the US sends over seas is lost. Members of OPEC buy German cars, Japanese electronics and Korean appliances or Soviet Military Surplus - none of it comes back to the US.

If the same money was paid to US farmers they'll buy Polaris 4 wheelers, John Deere or AGCO equipment, Gateway computers and big AMERICAN made pickups and trucks. Millions of hourly jobs are created to build that stuff and those workers have money in their pockets to buy their own durable goods.

http://ethanol.org/index.php?id=39&parentid=8

Where do they get this $2.53/gal cost?

If we stop ethanol. We should stop making beer and corn syrup?

It is not ethanol that is raising food cost! It is always speculators that run CBOT. It is easy to see that. And stop the LDP progam and limmit payments. Then see the prices of food.

I remember when the US invaded Afghanistan they asked framer in that country why they grow poppies for drugs. There answer was it was the only way they could feed there family.