[Wikipedia-l] Wikipedia references a source of anxiety(TheAustralian)

[Maury Markowitz]

>No analysis of the corn market, alternative sources of supply, of the
>general worldwide depression of agriculture that has existed since
>the horse was abandoned for the motor vehicle.  No mention that doubling
>of the price of corn would only result in a few cent price rise of a loaf 
>of
>bread. (most of the costs are due to production and distribution).

No analysis, like in your letter? Don't go blaming the mainstream press for 
problems you're only compounding.

So let me set the record straight, instead of writing an article on the wiki 
today. I'm going to do this, because my day job is at a company that invests 
in alternative energy markets, and that puts me in a position to have quick 
and easy access to information that may not be easy for the average reader 
to get their hands on. For instance, the BBG terminal has corn prices going 
back into the distant past.

Ethanol from corn is nothing more than an expensive form of crop subsidy. 
Period. It certainly doesn't help the energy situation, carbon balance or 
most any measure of the enviornment. Sugar cane is one thing, corn-based 
processes are a joke.

How much of a joke? Well practically _everyone_ except the current 
administration and the US car companies basically dismiss it completely. If 
this had anything to do with ethanol, you could just buy it from the 
Brazilians. But, in fact, the US maintains high import tarrifs on ethanol to 
prevent this from happening. Why? It's due entirely to lobbying efforts on 
the part of the car companies and farm subsidy groups. Car companies? Yes, 
they are well aware that widespread US production is years away, giving them 
lots of time to do what they have always done in the past -- wait and hope 
it all blows over. If this had anything to do with the enviornment, 
switching to diesel would be the trivial solution, but the Europeans and 
Japanese are far more capable of making this switch. For that reason more 
than any other, diesel continues to be pooh-poohed by Detroit -- there's 
been no technical problem for about a decade now (low-sulphur fuel, new 
engine designs and hybridizing has eliminated any possible compaint).

Now given all of this, you might think that the farmers would be wildly 
supportive of ethanol. Well that is semi-true for the corn farmers (but not 
all of them by any means), but practically every other farmer around the 
world hates it. And when I say around the world, that includes the US, where 
everyone from the farmers to the USDA is extremely worried about secondary 
market effects. Of particular worry is feedstock prices, which could be 
switched to other grains, but only for an economic loss. The reason we feed 
corn was because it was cheaper than everything else, and since the prices 
of "everything else" aren't falling, there's no way out. Most worrying, to 
quote the USDA, is the distinct possibility of "feed grain prices rising 
above farm program support levels". Read the report yourself:

http://www.ers.usda.gov/Publications/FDS/2007/03Mar/FDS07C01/fds07C01.pdf

Further, the price increases in corn have only just started. Until 2005 the 
price of corn had steadily decreased compared to the CPI, remaining stead 
around $2 to $2.5/bu unadjusted with periodic weather related spikes to 
around $3.50. A historical overview can be found here:

http://www.ontariocorn.org/market/basis.html

Currently the price is at it's lowest point in about a year, at $3.71/bu. 
This is historically unprecedented. Yet this is the _lowest_ price, which 
peaked over $4.30/bu and is expected by every commodities trader to return 
to those levels by the end of the season, with $5/bu being widely talked 
about.

http://economictimes.indiatimes.com/Markets/Commodities/Market_pros_have_a_go_at_corn_as_price_takes_a_hit/articleshow/1881351.cms

This IS having shakeout effects on other commodities as farmers attempt to 
cash in by converting land to corn production, for instance, cotton 
production is ramping downward.

http://www.signonsandiego.com/news/nation/20070409-0021-farmscene-cottonseason.html

Now, as you say, the price of the grain doesn't necessarily imply higher 
food costs. Well that's great in theory, but the only true measure of food 
costs is _actual_ food costs. And what's _actually_ happening? Worst case 
scenario: food costs are up across the board and are only outpaced by energy 
costs in terms of inflationary pressure.

http://www.theglobeandmail.com/servlet/story/RTGAM.20070410.wxfood0411/BNStory/Business/home

Having the govornment dump huge amounts of money into a single point of the 
economy is a repeated road to ruin. Doing so for what are highly politicized 
reasons only makes it worse. Its no different this time. If you think 
"weapons of mass destruction" was a bad idea, this one is likely far far 
worse for you.

Maury

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