Corn - The Low Cost Energy
- Corn heat cost less than any other energy even in year 2007 at the
all time historical peak for corn prices. The previous corn price
peak was $3.55/bu in the late 1970's. Expect Corn prices or corn
futures to be synthetically high during planting season to encourage
corn acreage to double in 2007. If corn acreage doubles as projected
in 2007 can anyone guess the price for corn in the fall of 2007? I
highly recommend paying the local corn farm the existing price even
when (not if) corn prices tank. Keep that local corn farm in
business for 2008 and beyond.
Following insane profits, note below that "Big Oil" is holding dyno
petroleum prices below the peak but above previous averages. The
price of corn futures is up during the corn planting season. As
intended, Ethanol refineries are loosing value. When approved
ethanol plants disappear, corn prices will tank and the price of dyno
petroleum will once again sky rocket. It is not legal to run
Tennessee corn ethanol moonshine at home without paying road tax and
dilution to prevent consumption with 10% dyno petroleum.
The Ratchet Affect - Big oil constantly rachets the price of fuel
continuously up and slightly down. Ratchet oil prices up to make
insane profits and slightly back down to drive out competition, keep
the big government "exploration" grants and government tax protection
No heat energy cost less than corn at $6/bushel including free cut-
your-own wood or pick-it-up-off-the-ground coal, if you haul and pay
Reprinted with credit and permission:
Ethanol: a smidgen of caution
Feb 12, 2007 10:04 AM, By Hembree Brandon
Farm Press Editorial Staff
Farmers who heretofore have had to look at energy prices as a cost of
doing business are now evaluating them in relation to crop plans and
Corn, which has always been basically a food/feed commodity, with
some corollary industrial uses, is now the primary ingredient for the
burgeoning U.S. ethanol industry. And now that farmers are producing
corn both for traditional uses and for energy, they're finding that
the commodity market volatility they've always had to contend with
now includes the volatility of the energy market.
Corn prices, which have reached all-time highs, and have had even the
straight-laced Wall Street Journal pondering the impact on the price
of corn flakes breakfast cereal, are likely to spur farmers to make
major acreage switches this year in order to capitalize on the
At the same time, everybody and his dog is jumping on the ethanol
bandwagon plants are springing up everywhere and dozens more are on
the drawing board. Many are majority farmer-owned; many have so far
made good money for their investors (thanks in part to a subsidy and
tax exemption amounting to almost half the per-gallon price). Some
investor groups have had purchase offers for their plants that would
return millions over their original stake.
At the other pole, one biofuels company which includes a bigtime
entertainer and a well-known movie star as major stockholders, has
seen its stock plummet from a high of more than $7 a year ago to 55
cents this week.
As any experienced farmer knows, markets (and investments) are
nothing if not changeable. Many remember the heady days of $12
soybean futures. Some, alas, also remember holding out for $15 and
the gloom that followed as prices dropped like a rock.
Corn futures, which have zoomed from below $2 at the end of 2005 to
more than $4 in January, have farmers salivating over crop prospects
and for the ethanol that has driven the price run-up.
But the ethanol industry is less than ecstatic over now having to pay
almost twice as much for its corn feedstock, particularly when the
price of gasoline (and ethanol) has been falling.
Some analysts say long-term corn above $4 and ethanol at $2 or below
could force many ethanol plants out of business. A significant drop
in ethanol demand/prices would send corn prices into a nosedive. (We
won't even speculate on the ability of Big Oil to easily put a major
price/profitability squeeze on ethanol, or on what would happen if
tariffs on imports were lifted and cheap ethanol from Brazil and
elsewhere flowed into the United States.)
The rosy picture President Bush painted for biofuels in his State of
the Union address only heightened the interest in ethanol and
alternative fuels, despite a glaring lack of any plan for an
infrastructure to support that kind of production and usage.
Until there is a major commitment to that infrastructure, either by
government or industry or both, the promise of alternative fuels will
continue to flounder.