ethanol

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. »
  • SwineCast
  • Add new comment
  • Read more

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 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 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.
  

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.

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).

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.

SwineCast 0258 Show Notes:

• Grains expectations and corn or soybeans?
• Ethanol development needs to be near protein production
• Dr Bill Hudson doesn't expect to move from corn for our ethanol energy source anytime soon
• Employee Management for Production Agriculture Presentations
• From the International PRRS Symposium... Dr. Reid Phillips presentation discussion on vaccine timing and management

The rapid acceleration in new ethanol plants over the last couple of years has resulted in current production capability reaching levels approaching the 2012 targets of the government mandates. Those mandates were for 7.5 billion gallons. Current production is estimated well over 5 billion gallons. Refineries currently under construction and/or expansion will add another 6 billion gallons of capacity if they are completed and come on line as planned.

By the end of 2006 we had achieved about 1.5% oil energy independence because of ethanol substitution according to the USDA. By 2017, if the massive growth they have forecasted actually arrives, we will be up to 3.7% oil energy independent compared to current purchases. This doesn't take into account the foreign oil used to produce ethanol in all of the various ways it works into the production process for corn etc. but if accounted, it would reduce these percentages by about one third.

Sometimes a picture is worth a thousand words. It is instructive to look up a chart of the prices for ethanol, oil and wholesale gasoline. If you go to one of a dozen easily navigated financial sites, you can take a look at price relationships between these three commodities by charting the December contracts in each.

If you examine the December 2007 futures contract for oil, wholesale unleaded gas and ethanol you will see that gasoline and oil have a very similar pattern, namely, rising throughout the summer months, peaking in July and falling through about August 20th. From that time until now, there has been a steady climb in both oil and unleaded gasoline for the December months.