Ethanol doubts in the heartland

It is worth checking out a story in the Des Moines Register, posted on 17 October by Dan Piller Ethanol cos. hurt by prices may get help from USDA. Read the comments.

, , , , , , , ,

One Response to Ethanol doubts in the heartland

  1. larryhagedon 21 October, 2008 at 3:57 am #

    Hi Simon,

    Same old problems and arguments I have been watching for 50 years now. The Ethanol wrinkle is new, but it is still only a side show, the basic agriculture commodities problems are eternal.

    Corn is and always will be a commodity. We have a vast capacity to over produce, to produce more corn products like food than we can sell.

    So one problem comes in when we flood and crash the markets, as happens frequently. A good growing year can do that. That always bankrupts lots of farmers.

    The other problem comes in when we have outside forces artificialy pumping up the prices. In the past this has been when nations like China suffer major crop failures and buy massive amounts of corn to feed their people. Export prices shoot up, more corn gets planted next year, China does not buy, the market is oversupplied and prices crash, again bankrupting many farmenrs

    Another uncontrolable factor has been the cost of inputs like petroelum. Again massive turmoil and people going busted.

    Many working farms require upwards of a million dollars in working capital to plant a crop that, with a little bad luck, may never get harvested.

    A new wrinkle with ethanol is that the technology is advancing so rapidly. Many distilaries with first generation technology can not make ethanol for the $1.72 a gallon commodity wholesale price.

    Many newer technology ethanol companies are beating a dollar cost, some are beating 50 cents a gallon cost. Good news for them, big time bad news for bio-tech companies that can not keep instantly updating their technologies and product mixes.

    It is a lot easier to lose a million bucks than to earn it in agriculture.

    None of this is new in the broad sense, and the turmoil and rags to riches to rags stories will keep on happening for the forseeable future. It is the nature of the industry.

    larry

Leave a Reply