Re: Ethanol, CRP and high food prices
Thank you for the information.
My landlady's patch was in iowa and she recieves $194 per acre which is the highest rate I have heard of in Iowa. There was no other incentive in addition to that. At the time, that payment exceeded the going cash rent for quality corn ground. Now cash rents are exceeding that in many case.
Why di they pay more than it was worth? I suspect to get people to participate and what works better than paying them well. I assume that most CRP ground is not the most highly productive in that it is prone to erosion or flooding. Ours was deep black soil of the higest quality but often the mighty Boone over flowed and flooded it. I didn't likenplanting and I liked replanting it even worse. Of course, a destroyed crop isn't bery profitable.
actually the study I saw, from someone named Sangwon Suh from the University of Minnesota Bioengineering Dept., said that it takes a little less than 4 gallons of water to produce 1 gallon of ethanol. the same study said that it takes 5 gallons to produce 1 gallon of gasoline. This was found in the mid Feb. magazine Farm Industry News. Also, the U.S. Dept of Energy says it takes .78 million btu's of fossil energy to produce 1 million btu's of ethanol energy. Further, it takes 1.23 million btu's to produce 1 million btu's of gasoline.
Food vs. Fuel Makes False Assumptions
People who argue that the use of corn for fuel takes it away from use as food forget that the farmers have some say in the matter.. What these people ignore is that many of us farmers choose to grow a crop because it produces income. So, if ethanol is no longer a use for corn, many farmers will re-evaluate their cropping program to determine what is the next best crop. We in Iowa are used to growing corn and soybeans, but some of us might put some corn ground in hay or wheat. Farmers in the corn belt fringe states might put their "corn ground" into rice, cotton, wheat, soybeans alfalfa or other. It's likely that the cost of corn won't go down as much as the food for fuel advocates expect, because we simply won't grow so much corn.
Re: Ethanol, CRP and high food prices
CRP is 31 million acres but corn used for ethanol takes roughly 33 million acres. I'm sure all locations are different, but how suitable for growing crops is CRP land? I'd venture to guess there's very little if any good ground in CRP. With the profitability of crops the past few years, those who had good ground in CRP would have paid the penalty and already taken it out. Most of the ground around here enrolled in CRP is ground that's either under water or ground when farmed that blew away. Within the last couple of months, a quarter that's been in CRP for 18 years came up for public auction. It brought $130 per acre less than the pasture right beside it because the grass on it was so thin it wasn't really even suitable for grazing.
A couple of points. We really don't have the technology to produce ethanol from biomass that's cost effective. The mandates for biomass produced ethanol have been waived the past couple of years because we just can't do it yet in a cost effective manner. Cattle pasture sounds good in theory, but it isn't in reality. We have the smallest cow herd since 1958. This isn't because we don't have the range for higher numbers of cows. It's because of the profitability of the cow/calf herd. Adding more acres won't dramatically change this.
Ethanol consumes roughly five billion bushels of corn. From this five billion, we get roughly 1.65 billion back for livestock feed. This nets out 3.35 billion bushels. Current carryout is pegged at roughly 745 million. After adding current carryout and the net from ethanol, we'd have a current carryout at roughly 4.1 billion bushels of corn. Would corn prices be nearing $7.00 with a 4.1 billion carryout? The current gasoline carryout is roughly 236 million barrels. This is the highest carryout for gasoline since March 1993. The current ethanol carryout is roughly 19 million barrels. Even if we subtract off the 19 million barrels of ethanol stocks from the gasoline stocks, we're still left with roughly 217 million barrels of gasoline carryout. At 217 million barrels, gasoline stocks would still be in the upper 15-20% range since 1995 meaning we'd have more stocks than we did 75-80% of the time between 1995 and now.
Getting out from under the "food for fuel" criticism sounds good in theory, but the math just doesn't support it as being realistic. Instead of arguing about CRP, one would have a better argument with regards to food vs. fuel by debating Bernanke and the Fed's policy on the destruction of the U.S. dollar. I'd argue that Bernanke's policies have a lot more to do with double digit food inflation in parts of the World than U.S. ethanol. Another point to ponder is food consumption. I read an article the other day that stated the number one health problem in the World is obesity.