ethanol

U.S. bioenergy policy: Time to refuel?

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A recently-released policy paper by Rice University’s Baker Institute for Public Policy is questioning the United States’ biofuels policy, and rightly so. The paper, “Fundamentals of a Sustainable U.S. Biofuels Policy,” challenges the economic, environmental and logistical basis for ethanol production.

The New Wedge Between Crops and Livestock: Government Policy

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In one sense, there has always been a certain conflict between crops and livestock since they tend to benefit from each other when the one is not doing so well at least price-wise. When crop prices are low, at least temporarily, livestock producers gain profits through lower cost of production. When crop prices skyrocket, livestock producers tend to struggle until a passthrough occurs or some adjustments take place. In the past however, there were good reasons for the two major arms of U.S. Ag to talk about their symbiosis and protect each other's interests. That's when the vast majority of U.S. produced corn, for instance, was destined to be livestock feed. That dynamic is changing largely due to government policy changes.

More Meddling in Markets or "The Problem of Too Many Balls in the Air" Revisited

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We have in the US energy policy regarding ethanol an illustration of the classic problem in economics which I like to call "too many balls in the air". When it comes to economic thinking and analysis, individuals or groups with "skin in the game" tend to focus tightly on the single variable they want to improve (like the corn price in the case of ethanol) and fail to understand that markets are complex interactions of sometimes hundreds of linked transactions and markets all of which can and usually are affected by extra-market interventions to move the target variable. There are economic models that can and do attempt to account for all of these impacts simulataneously and track the movement to a new equilibrium in all affected markets but they can be large and clumsy and not very good at tracking the short term movements to new long term equilibria.

SwineCast 0315 for June 25 2008

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SwineCast 0315 Show Notes:

Livestock groups taking RFS concerns to Washington
Rationing today's corn crop. How much... where to... and why
AVMA updates website with position papers on animal welfare
Save fuel costs and neighbor complaints with vegetative buffers.
This Can't End Well...
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This cannot end well. This cannot end well for anybody. While there are clearly a host of forces at work in the world of agriculture today, the decision to remove 30-35% of the corn crop from the food supply will one day soon be acknowledged as a very bad mistake. At the present time, if there is any benefit going to the consuming public through lower gasoline prices as is alleged by the ethanol supporters, it is being paid for almost exclusively on the backs of poultry, livestock and milk and egg producers primarily in the United States. There is just such a woven set of consequences to this that it is hard to pry them all apart.

SwineCast 0306 for May 28 2008

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SwineCast 0306 Show Notes:

Recapping the farm bill outcomes for pork producers and a preview of World Pork Expo with NPPC's David Warner
China figures to be a bright spot in world pork import needs. Bruce Cochrane has more
Economist says higher gas prices could help to level the biofuels playing field. However, he's not running for office...
Food prices increase 40% around the world over the past year

SwineCast 0304 for May 20 2008

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SwineCast 0304 Show Notes:

Special "Food AND Fuel" USDA conference with Secretary of Agriculture Ed Schafer lays out the economics on why they aren't mutually exclusive. Link to video and transcript.

USDA Food Price Inflation Projections for 2008 Have Just Been...Inflated.

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The USDA has just raised its expected food inflation numbers to 6% for 2008 on the heels of a 4.2% increase for 2007.

http://www.usda.gov/wps/portal/!ut/p/_s.7_0_A/7_0_1OB?contentidonly=true&contentid=2008/05/0130.xml

My best guess is that they will be back to the well to up that again by the end of the summer. The projections show the greatest increase in food prepared at home with eggs, dairy and fats and oils categories leading the charge. Pork is estimated to increase only 1-2 percent this year.

Like Never Before..."It Depends.", Is the Correct First Answer to Any Economic Question

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There is a set of important variables that all could impact the current situation of pork producers in the U.S. and worldwide. Keeping them all in view is a wise thing for you to do on a daily basis.

1. The Growth of Ethanol Distilleries and the resulting oversupply which is beginning to hit the market will have a big impact on the price of corn and really all grains, both directly and indirectly in the coming year. Will the government step in and up mandates and will all the players (like automobile companies) agree to 20% inclusion in unleaded gas? Some plants are already stopping production and others are stopping construction. It looks like lenders and outside investors are getting smarter about this. (http://www.sacbee.com/103/story/796178.html).

Seeing Red in October

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Mark Greenwood
November 2007

Seeing Red in October
This month will not be a good month for pork producer’s balance sheets. In a cost vs. revenue comparison, most systems will lose $10-$15/head during October. Some producers locked in some margins back in August, but most producers did not lock up a large percentage of their hogs with those margin opportunities.

Perhaps the reason more producers didn’t lock in more profits can be explained by reviewing the following December futures chart. You can see the volatility in this month. Many clients that I work with started to hedge for the fourth quarter right around the end of July. As you can see by the chart, it spiked up to $74 in early December. We had a massive amount of margin call money that went out and people stopped hedging because producers struggle with paying margin calls. The market went down and some people hedged a little more. Then the market bounced back up to nearly $70 again in early- to mid-September. Since, it has been a free-fall spiral downward.