Wednesday, May 18, 2011

Well, Maybe We'll All Lose Weight?

Trying to find the sliver of a silver lining in this dreadful news which I have copied in full from Instapundit.
GRAIN PRICES SURGE ON WEATHER NEWS: “Grain prices surged as persistent rains fueled worries that farmers won’t plant as much corn and wheat as they had planned. . . . While the direction of crude-oil prices are closely linked to the health of the global economy, the outlook for agricultural commodities is fraught with more uncertainty because cool, wet weather has thwarted early plantings in the U.S., the world’s biggest grains producer. . . . Corn planting, in particular, is drawing attention because farmers need to harvest a big crop next fall to rebuild stockpiles, which are projected to reach a 15-year low this year.”

UPDATE: A reader emails:
Your post on grain supplies surging is too polite by half. We haven’t only reached a 15 year low – we’ve reached the historic low (going back to the fundamental change in farm policy instituted by Earl Butts in the early 70s). Whatsmore, the levels of corn in reserve we are seeing now hasnt been this low since 1937 at the height of the dust bowl.

Most of this, btw, is caused by ethanol: which received tremendous subsidies on top of a massive purchase mandate and of course import tariffs to keep foreign ethanol out of the market.

At least 40% is directly attributable to ethanol. The rest comes from changes to grain markets (people planting less wheat or cotton or soy beans for instance) because of ethanol support.

On top of the wet cold spring causing concern now, Texas and Oklahoma are experiencing the worst drought in 40 years. If it spreads to the Midwest this summer, and we don’t have the largest corn yield in history, we will run short of corn in August of 2012 (we may still run short this year too – we have about 14 days to carry us through till the fall harvest).
Ugh. On the upside — well, maybe it’s an upside, maybe not — the shutdown in Mississippi barge traffic is holding up exports.

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