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Corn hits a new record — $6 a bushel

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"Corn hits a new record — $6 a bushel"

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corn.jpgAt the end of February, I blogged on a Fortune article that had the sub-head, “The ethanol boom is running out of gas as corn prices spike.” That article noted:

Spurred by an ethanol plant construction binge, corn prices have gone stratospheric, soaring from below $2 a bushel in 2006 to over $5.25 a bushel today. As a result, it’s become difficult for ethanol plants to make a healthy profit, even with oil at $100 a barrel.

Just six weeks later, we have an AP article with the subhead: “Corn Prices Jump to Record $6 a Bushel, Driving Up Costs for Food, Alternative Energy.”

And it gets better worse:

Worldwide demand for corn to feed livestock and to make biofuel is putting enormous pressure on global supply. And with the U.S. expected to plant less corn, the supply shortage will only worsen. The U.S. Department of Agriculture projected that farmers will plant 86 million acres of corn in 2008, an 8 percent drop from last year….

Another loser in higher corn costs is ethanol producers, who are struggling to squeeze out gains as corn’s record-setting run outpaces the price of ethanol, currently at around $2.50 a gallon.

“For years, corn was cheap and fermentation processes for ethanol production came to completely dominate the biofuel industry in North America,” Michael Jackson, president and chairman of Vancouver-based ethanol maker Syntec Biofuel, said this week. “Now, with corn prices well over $5 a bushel, corn ethanol economics have gone out the window.”

And the worst is yet to come:

The nation’s 147 ethanol plants now have the capacity to produce 8.5 billion gallons of fuel a year, according to the Renewable Fuels Association. Corn is the basic feedstock for most of the plants and about 20 percent of last year’s 13 billion bushel corn crop was consumed by ethanol production. That percentage is expected to increase to 30 percent for the next crop year, which ends Aug. 31, 2009, according to Terry Francl, a senior economist for the American Farm Bureau Federation.

There are still plans to build or expand another 61 plants, which will add about 5.1 billion gallons of capacity. However, as corn prices have climbed over the past year or so, construction of several plants has been halted or delayed, shaving about 500 million gallons worth of capacity off the original figure, according to Broadpoint Capital analyst Ron Oster.

The 2007 Energy Bill mandate is actually for 15 billion gallons of corn ethanol by the middle of the next decade. Hard to see how corn prices will be coming down any time soon.

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28 Responses to Corn hits a new record — $6 a bushel

  1. Paul K says:

    How can we ever get away from corn ethanol? Maybe we need to invest in R and D for alternative biofuel sources. Heck no, that would be a rotten Pielke delaying tactic.

  2. Uosdwis says:

    We can’t grow enough corn to supply our needs, but by trying, we’ll accelerate the ruination of the American bread basket. Ironic, huh?

  3. JCH says:

    There is already a ton of ongoing R&D on other sources.

  4. Tommaso says:

    Paul,

    Even though we do need some R&D for cellulosic, the real change in our fuel emissions will happen when we start implementing currently available fuel efficiency technology , boosting public transit and controlling sprawl. The priority right now should be to decrease our reliance on liquid fuels, not finding cleaner ways to burn things (put very bluntly :p).

  5. Paul K says:

    Tommaso,
    One way to deemphasize corn ethanol is to vote for John McCain, the only candidate with a record of opposing it. He, like you and me and Joe, is gung ho for applying all current technologies.

  6. Joe says:

    Paul: You haven’t been reading what this blog has been writing on McCain. He is the only one who doesn’t like strategies deply current technologies. He also flip-flopped on ethanol and now supports it!

  7. Nick says:

    Quick links on McCain’s flip flops on corn ethanol:

    http://money.cnn.com/magazines/fortune/fortune_archive/2006/11/13/8393132/?postversion=2006103111

    http://blog.mlive.com/livin_green/2008/03/corns_connection_to_the_rainfo_3.html

    http://www.washingtonpost.com/wp-dyn/content/article/2007/03/12/AR2007031201722.html

    If someone wants to compile his voting record on the subject, that would be great too. It doesn’t count if he’s abstained (what kind of leadership is that, to miss votes constantly).

  8. Mike says:

    Any time you have bureaucrats mandating something, there’s going to be problems. The notion that bureaucrats could accurately identify the correct technology for a particular problem, and then accurately identify the correct amount of resources to devote to it, is absurd.

  9. David B. Benson says:

    Of course, removing the exorbitant import duty on Brazil’s ethanol-from-sugarcane is too sensible…

  10. cambel says:

    I’m curious about two things.

    1. Why are farmers planting LESS corn this year. That just smells funny. The price has gone up 300% yet farmers suddenly decide to plant less?

    2. Since sugar can be converted to Ethanol so much easier than corn, and we already subsidize sugar growers in LA. Why, if Ethanol is going to be an effective alternative to oil, are we not upping our sugar production in places like LA, MS, and HI?

  11. dianeremarx says:

    Why are would we, for God sakes, use any plant we are growing for food to use as a fuel. Who’s stupid idea was this? This is one of the main reason food prices have sky rocketed this past year. There are more and more people being born every day who need the foods that are processed by corn, let alone all the animals we feed corn to. THIS BIO FUEL IDEA IS JUST PLAIN STUPID!!

  12. Cynthia Nunn says:

    I’ve got two words for the pro-ethanol folks: dust bowl. Read your history!

  13. Alison says:

    I say get rid of all those farm subsidies. If corps are in such demand right now why does the government still pay huge farm companies billions of dollars? I’m sure that would help lower price per bushel!

  14. David B. Benson says:

    cambel — Crop rotation is important to maintain soil productivity. Soybean prices are also very high. AFAIK there is no ethanol-from-sugarcane produced in the United States.

    dianeremarx — Just now sugar is a glut on the world market and the price has been dropping for years. In those locations where only sugarcane grows well, it makes sense to use the sugarcane to produce ethanol.

  15. Don says:

    My usual sources of ethanol are barley malt and sugar. I don’t know about barley but isn’t South American sugar just about cheaper than dirt?

  16. What IF? says:

    Cynthia says “dust bowl.” And I agree with her. What people don’t understand that is that ethanol is produced from carbon. So why grow corn or milo or sugar beets or sugar cane for a one-a-year harvestable carbon atom? Simply change the chemistry set to thermal conversion using super heated steam (instead of biobugs) and then carbon can be cleanly obtained from gasified coal, garbage, sewer sludge, biomass wastes, petroleum coke bottoms, ground tires and even CO2 greenhouse gas. Then re-arrange the three basic atoms of carbon, hydrogen and oxygen as derived from water and get on with producing biodegradable alcohols. And there is a lot more coming which isn’t ethanol here folks. Just wait – the $6 corn price is spurring innovation.

  17. Michael Bender says:

    http://www.kingcorn.net/ — rent it, buy it, show it, distribute it.

    Wake up, America. If not from the outside, we will be done in by ourselves from the inside. One way or another, it’ll be due to institutionalized greed and rapcious desire…

    “Where are we going? And what are we doing in this handbasket?”

  18. Bob Borden says:

    Solution: BRAZIL!!

  19. David B. Benson says:

    Another take on corn and prices of essentials:

    http://www.livescience.com/blogs/author/robbritt/

    entitled “Corn: The New Gold”.

  20. truthynesslover says:

    No shit! anyone who has been paying attention knows corn is the LEAST efficient .Wild grasses, hemp, sugar cane,plants that grow fast without much interferance or chemicals.The ONLY reason corn has been the choice is the american farmer and the power of the farming lobby which is heavily subsidized by us1

  21. Anonymous says:

    Bob,
    If your implying that Brazil’s biofuels programme has been successful then unfortunately it hasn’t. The mass deforestation, which is ongoing to make room for planting biofuel crops will actually contribute to more net CO2 emissions than the combustion of fossil fuels- and this is even before production of a theoretical ‘carbon-neutral’ fuel!!!
    My advice to the US government, and every other governement around the world would be to invest heavily in an infrastructure that would support the sustainable production of electricity and the introduction of electric vehicles, because only then might we have a chance at achieving a sustainable lifestyle.

  22. dianne wonders says:

    So many of you want sugar to be used in ethanol and it is from beets. Ethanol is also made from cotton, hemp, and wild grasses. Did you know that the plants that use wild grasses can’t turn a profit and that is why we don’t here much about it. Did you know that in the 70′s when we had a fuel crisis there were those that were trying to find another way to fuel our gas guzzling economy? These people were trying to find a product (crop) that could grow again (renew itself) and supply our thirsty vehicles. They did not turn a profit until the mid 90′s and now everyone is blaming farmers for raising food prices. Did any of you think about how the crop is harvested or transported? Those machines that farmers use don’t run on ethanol, they use diesel made from oil and people that make those machines have not tried to make the machines so they can run on soy-diesel. The semi-trailers and railroad that transport the products to our grocery stores also use diesel (some soy-diesel).

    I think people are dumb enough to believe it is the farmers fault and the fact that oil companies just made a huge profit in the first three months (over 12 billion dollars between two companies) of 2008 doesn’t make anyone think differently. Maybe we need to point out the the oil lobbyists are doing a good job of keeping the focus off their profits and on the farmers who are finally grouping together and saying enough farms have gone under and the oil companies can start taking the blame for higher food costs.

    Cynthia and Whatif you are concerned about a dust bowl, if you live in the city this is the least of your worries because it is not your way of life or way that you earn your living. Farmers would be stupid to ruin their own fields and create a dust bowl and then lose their farm on top of it all.

    Cambel you must want a dust bowl to happen because you think farmers are planting less corn to gain a profit when what is happening is they are rotating crops. If you would take the time to really talk to someone on the front lines of farming maybe you would learn more about it then what the media has to say. Also there are many farmers out there that take some acres out of corn and soybean production for 1 to 5 years and use it for wheat, milo or hay crop to regenerate the dirt without chemicals depending on how much nutrition needs to be revived into the soil.

    Anonymous you’re right we should come up with a way to sustain electricity, because right now we use fossil fuels to produce electricity, but there are those trying to develop a way to havest the wind, methane gas, and water power to sustain electricity. And when these companies start to turn a profit that cut into the bottom line for the fossil fuels we use now you will see a price hike of those fossil fuels, so they can keep there bottom line profits.

    As for what is happening in Brazil, it is sad that this country that has so many people that they trip over each other is trying to take care of itself. They have companies from other countries that come into the country and cut down the forest to make a profit (and kill the rain forest) from the trees they harvest for our houses and furniture and then turn it over to farmers to plant other crops than trees(they take to long to grow). By the way did you know Brazil had a drought last year and had a very small corn crop? There is more to the deforestation then just farmers that want to plant biofuel crops. Take a harder look.

    Live on a farm for a year and you will see that the choices we make and the jobs in the city are much more cushy. I did and it changed my perspective about alot of things in my life. I’ve got it good here in the city.

  23. charlie c, venice, ca says:

    Better to pay our farmers , then pay the rag heads. keep the money here in the usa. Its that simple!

  24. Jim says:

    An acre of corn (140 plus or minus) bushels yields about 20 gallons of ethanol. With 25,000 children on the planet dying of starvation each and every day, is ethanol a morally acceptable solution to satisfying the American Petroholic?

    Ethanol is “too little, too late” for a country that has been “too stupid, too long.”

  25. Dianne wonders says:

    How much nutrition do these starving children get from corn? I donate to two charities that help with some starving children and rice is the crop that is used to feed these children because it has a higher protein.
    Jim you say that Ethanol is to late, but what would be your solution to the higher gas prices. Anything that is not renewable energy would not be a good solution because fossil fuels will no longer be whether it be in 10 years or in 1000 years it does not reproduce itself.. Something to think about.

  26. John says:

    GOOD. we should not be using food (corn, which is grown from fossil fuels) to fuel our cars and feed livestalk. Cows eat grass not corn. And maybe if we didnt have so much corn to make cheap “food” and “sustainable” (not) fossil fuel corn, we wouldnt have a dead zone in the gulf of mexico the size of new jersey, and 1 in 3 of the generation below us wouldnt suffer from diabeties.

  27. John says:

    GOOD. we should not be using food (corn, which is grown from fossil fuels) to fuel our cars and feed livestalk. Cows eat grass not corn. And maybe if we didnt have so much corn to make cheap “food” and “sustainable” (not) fossil fuel corn, we wouldnt have a dead zone in the gulf of mexico the size of new jersey, and 1 in 3 of the generation below us wouldnt suffer from diabeties.

  28. Josh Buckley says:

    Yah for the government to suggest , suggest with positive reinforcement the greed for space and surplus for farmers to grow freak weeds that spit out cob replicas is the sort of irresponsible indifference that makes somebody not smile, check out http://www.slothbob.com