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US Insane Ethanol Biofuels Policies Cause of Food Crisis

Commodities / Ethanol Jul 05, 2008 - 11:59 AM GMT

By: Mike_Shedlock

Commodities Best Financial Markets Analysis ArticleA World Bank Report suggests Biofuels behind food price hikes .
Biofuels have caused world food prices to increase by 75 percent, according to the findings of an unpublished World Bank report published in The Guardian newspaper on Friday.

The report's author, a senior World Bank economist, assessed that contrary to claims by US President George W. Bush, increased demand from India and China has not been the cause of rising food prices.


"Without the increase in biofuels, global wheat and maize stocks would not have declined appreciably and price increases due to other factors would have been moderate," the report said.

16 Ethanol Planys File Bankruptcy

The US Ethanol Industry Is In Distress .
The U.S. ethanol industry is in trouble and can expect to see a rash of bankruptcies and dismantling of at least some production, according to a specialist who helps companies in distress.

Alex Moglia, president of Moglia Advisors based in the Chicago area, said he knows of at least 16 ethanol companies that are filing for bankruptcy, and there will be at least two to three times that number filing within the next year.

The weakness of the U.S. dollar makes it possible for foreign investors to acquire ethanol plants "at a deep discount," he said.

"They can buy as low as 20 or 30 cents on the dollar," Moglia said. "That should scare the hell out of anyone in the biofuels industry. I've worked with plants that are incomplete, others that can't offer profitably so they've all shut down. This will shake out most of small- and mid-sized players. Larger players will survive because they have buying power."

More ethanol producers will continue to file bankruptcy, he said, because of high feedstock costs and a "limited upside flexibility in terms of how much you can sell ethanol for."

"The demand for ethanol is not there," Moglia said. "The same thing happening to ethanol is happening in the biodiesel business. It will be the Wal-Mart-ization of the ethanol industry. It's just a mess."

Peiffer said many ethanol plants are and will be folding because "the business model they were built on doesn't work." Farmers and their cooperatives have either borrowed money or pledged their land as collateral in building ethanol plants, he said.

For every 10 ethanol and/or biodiesel plants "you read about in the media, there are probably 50 to 100 others that are in financial difficulty and are contemplating shutdown," Moglia said.

Since ethanol production is mandated by the federal government, he said they are already "operating outside free-market fundamentals.

Ethanol Tariffs An Economic Failure

Ethanol Producer Magazine is reporting Brazil launches campaign to remove ethanol tariff .
The Brazilian Sugarcane Industry Association is launching a public relations campaign on the Fourth of July designed to encourage the American public to pressure the U.S. Congress into removing the 54 cent ethanol import tariff. The 2008 farm bill extended the tariff, designed to support an emerging U.S. ethanol industry and to prevent foreign ethanol producers from benefiting from American subsidies, through 2010.

The Are We There Yet? campaign, which consists of an interactive Web site and television ads, is supported by various U.S. food and meat processing companies. The association chose to launch its campaign on the Fourth of July holiday because it's one of America's busiest travel holidays.

“Americans are being denied an opportunity to save money at the pump,” said Joel Velasco, chief representative for UNICA. “There is a solution that could have an immediate impact on [the] price at the pump – lifting the tariff on imported ethanol.”

Government Mandated Solutions Fail Again

  • 16 ethanol producers have gone bankrupt, many more are on the way.
  • Farmers pledging land as collateral for ethanol production are at risk.
  • Food prices are higher.
  • Consumers are paying higher prices at the pump.
  • Corn is fertilizer intensive. Growing corn for ethanol production drives up the cost of fertilizer.

By Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com

Click Here To Scroll Thru My Recent Post List

Mike Shedlock / Mish is a registered investment advisor representative for SitkaPacific Capital Management . Sitka Pacific is an asset management firm whose goal is strong performance and low volatility, regardless of market direction.

Visit Sitka Pacific's Account Management Page to learn more about wealth management and capital preservation strategies of Sitka Pacific.

I do weekly podcasts every Thursday on HoweStreet and a brief 7 minute segment on Saturday on CKNW AM 980 in Vancouver.

When not writing about stocks or the economy I spends a great deal of time on photography and in the garden. I have over 80 magazine and book cover credits. Some of my Wisconsin and gardening images can be seen at MichaelShedlock.com .

© 2008 Mike Shedlock, All Rights Reserved

Mike Shedlock Archive

© 2005-2022 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Comments

Christopher Calder
06 Jul 08, 11:23
Barack Obama is king of starvation and ethanol insanity!

Barack Obama voted for turning mountains of our own precious food into water contaminated, low energy ethanol fuel that is a financial rip-off and a substantial cause of food price inflation. Barack Obama does not have a clue about economics, science, or mathematics, and he is irrationally is trying to vilify the very people who can give us lower priced gasoline if we only let them.

Oil price increases have not shrunk the human food supply, but biofuel production has. The more biofuels we produce, the less food we have to eat, because we grow biofuel crops, even switchgrass, using the same land, water, fertilizer, farm equipment, and labor we use to grow food. Biofuel production accelerates global warming, creates water shortages, and erodes topsoil. A new study says biofuels from cellulose sources, such as switchgrass, wood chips, crop waste, etc., will never be cost effective.

See biofuel facts at - http://home.att.net/~meditation/bio-fuel-hoax.html


Upwithbiofuels
07 Jul 08, 05:48
Biofuels

The major problem in the world today is FOSSIL FUELS and the fact that their prices are skyrocketing makes matters even more worse.

1. Fossil fuels cause wars. Saddam Hussein invaded Kuwait. Why? It wasn't because he wanted a better seaside villa on the Persian Gulf. All the descending wars from this one were either directly or indirectly caused by FOSSIL FUELS.

2. FOSSIL FUELS cause global warming. This is fact and if you disagree you must be an American Republican.

3. FOSSIL FUELS not biofuels are the major reason for the increase in global food prices. Every process from planting seed to preserving the food after it reaches market is affected by the price of fossil fuels. I would list them but it would take several pages.

4. FOSSIL FUELS are the major reason for all other inflation today around the world. If it would take several pages to explain the processes involving fossil fuels in the food industry it would take a book to explain their affects on all other markets.

It has been proven that with wise management and sustainable practices that the world can produce enough food and fuel from the land. This will not only reduce greenhouse gas emissions but provide income to rural areas around the world where so much poverty exists today. Over 1 billion people in the world today have an income of $1 or less. This would change with the advent of biofuels.


jamie in brooklyn
07 Jul 08, 09:11
Stop Burning Our Food---Free Energy Now!

I don't think we should be burning our food. Period. I love the idea of clean, planet friendly fuels, but we need to develop free energy that runs on sunlight, or self-generates. I know it's out there, Tesla developed it, but it's sitting on a shelf in a Top Secret room somewhere. Until the Oil Industry goes bust, and it will, we will not know the great benefits of free energy.

Stop burning our food! Senator Obama, please drop the ethanol drive!


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