July 24, 2012
I BLAME GEORGE W. BUSH: U.S. Drought Could Cause Global Unrest. “USDA needs to figure out a way to remove the mandate on ethanol use from corn . . . . If we could free up 20 to 30 percent of the U.S. crop, reduced as it is, it would bring corn prices down very quickly.”
UPDATE: A reader who requests anonymity emails:
I work for a grain and ethanol company. Our ethanol guys say cutting the ethanol mandate would not solve the supply and demand issue until fuel refiners adjust their blends to remove ethanol. The mandate created ethanol demand which will be difficult to “unwind.” I don’t believe it is easy and I know it is not cheap. I think the comparison is somewhat similar to the problems with switching from winter to summer gasoline blends but on steroids. The government would need to mandate limits to blending ethanol to cut use (unless corn prices get really stupid). Think this will happen in the fall of an election year ? With real corn supply problems meat prices will not get silly until next year. Herd/flock liquidation may depress meat prices in the short run. Buy a freezer.
Getting more discussion in the grain trade is the issue of aflatoxin. The weather in the corn belt makes this a likely problem. Corn over 20 ppb aflatoxin has very limited uses. What is “available” may not be entirely usable.