Crop reports from the last few days reflected a downward shift in supply.
Today we have news about an outward shift in demand: a report that EPA is going to approve a 15% ethanol blend, up from 10%. That means demand for corn could rise from roughly one third of the U.S. crop to roughly half. Put another way, from about the 5% of the world's caloric base in grain/oil production (corn, soybeans, wheat and rice) to about 7.5%.
Yikes.
Oddly, prices didn't jump much with the news. I'd guess the market expected this ruling to be likely awhile ago.
Still, corn is back up to $5.77 a bushel. Wheat is above $7 and soybeans are trading at nearly $12. Rice is at $13.45, up from about $9.50 a few months ago. It's not 2008, but those are pretty high prices.
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Thanks for the update, Mr. Roberts.
ReplyDeleteMan, it's the trend that is really troubling, more than the seemingly [don't be fooled, people] small rise of a few bucks. Your post brought many thoughts and questions to my mind. Like...
Is this ethanol demand-shock-thing gonna get exponentially larger as time goes on? Is there something that can be done now to prevent a potentially tragic outcome down the road?
Do people making policies know that designing a system in which we pile unnecessary demand onto already-in-demand, weather-sensitive staples we create instabilty on all sides of the equation?
Why not use algae or any of a variety of other fuel sources that a huge population of the world doesn't require daily for sustenance?
I'm starting to think this is the setup for the next conflagration - the tortilla wars. OMG.