The Effects of Ethanol on Texas Food and Feed (PDF)

[jpak]

http://www.ncga.com/ethanol/pdfs/2008/Effects%20of%20Ethanol%20on%20Texas%20Food%20and%20Feed%204-11-08%20TAMU.pdf

The key findings contained in this report are:

• The underlying force driving changes in the agricultural industry, along with the economy as a whole, is overall higher energy costs, evidenced by $100 per barrel oil.

• With rising energy costs, corn and other commodity prices would have to increase. Rising fertilizer costs led to a 3 million acre reduction in planted corn acres in the 2006-07 crop year. Higher production costs will continue to pressure acres.

• This research supports the hypothesis that corn prices have had little to do with rising food costs. Higher corn prices do have a small effect on some food items.

• Speculative fund activities in futures markets have led to more money in the markets and more volatility. Increased price volatility has encouraged wider trading limits. The end result has been the loss of the ability to use futures markets for price risk management due to the inability to finance margin requirements.

• The potential exists for even higher corn prices based on historical yield variability. Fewer corn acres planted in 2008 leave production susceptible to weather risks. Small yield reductions will result in even higher prices.

• The liveststock industry has borne the costs of higher corn prices. The structure of the industry has made it unable to pass costs on, either up or down the supply chain.

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[bananas]

1. "This research supports the hypothesis that corn prices have had little to do with rising food costs

k&r.

[Tashca]

2. Closest analysis I've seen to reality.

Energy is the absolute biggest change driver in Ag right now.

Corn acres are dropping......and next year will drop more unless input prices turn around. Phosphate last fall was $450.00/ton is now $1150.00/ton and will be at another 10% higher than that by this coming fall. Potash from $300.00/ton last fall to $800.00/ton currently and rising too. I don't even want to guess on nitrogen....but probably triple the price of last fall.

Corn has little effect to rising grocery prices.........yup.

Speculative funds.....yup.

Higher corn prices because of smaller acres and weather variability. ....yup

Livestock industry. I would say this is true with poultry and pork. Those industries are dumping excess right now and providing cheaper prices at the store. I would argue that the beef industry might be making a resurgence right now in the midwest.....with the cheap cost of corn ethanol by-products....in comparison to the price of corn. Unfortunately the pork and poultry industries have not figured out how to utilize this product.

Finally and analysis that makes real sense.