"The state-supported increase of the ethanol blend in the US is a major reason for the rise of corn prices in our view."
I don't think that's right. We're close to but not at the blend wall yet, so I don't see that increased ethanol demand is accurate.
Bruce Babcock, ISU professor of economics said in 2010 that removal of the blenders credit would not move corn prices much.
"Projected strong demand for ethanol in Brazil combined with a largely saturated U.S. ethanol market means that elimination of ethanol import tariffs would have almost no impact on U.S. corn and ethanol markets in 2011. Elimination of the tax credit would impact markets modestly, with ethanol production declining by an average of about 700 million gallons. This reduction in ethanol production would cause corn prices to drop by an average of 23 cents per bushel. Ethanol prices would drop by 12 cents per gallon. Elimination of the tax credit would shift the burden of meeting mandates from taxpayers to blenders and consumers. Taxpayers would save more than $6 billion through elimination of the tax credit, or almost $7.00 per gallon of ethanol produced in excess of mandated amounts."
Personally, I'd like to see the tariff and blenders credit dropped. The mandate is the thing that drives ethanol demand. It is a political decision involving environmental policy.
Anyone who thinks I'd grow cheap corn in lieu of some other crop such as soybeans, hay, CRP, leased hunting or whatever is not considering my financial goals and objectives. I feel no obligation to "feed America" on the cheap.
In the midwest, we've always had grain storage, even if it meant piling it on the ground. Many farmes who had to sell off the combine hedged their grain. With grain storage and screwy markets, some farmers are storing it and not hedging. On farm storage means less need for local elevators, as farmers sell through a grain buyer and ship directly to the mill.
