by Val Germann
The recent Thanksgiving holiday took this writer back to his hometown in north-central Missouri, and right past the new corn-ethanol plant near Malta Bend. I stopped this time to take a photograph since it was such a nice, sunny day. A brand-new shiny ethanol plant, set down in the middle of a giant corn field right next to a rail line, looks exactly like the photo below.
This photograph was made in the morning, the day after Thanksgiving, and the wind was blowing over my shoulder toward the plant. The air was clear and clean. However, when I drove past this plant again, that same evening, the wind had shifted about 180 degrees! The odor from this facility, resembling that of Peach Ripple wine (don’t ask me how I know!) was powerful even inside our van (!) moving at about 60 miles per hour! The little town of Malta Bend, with a school, is about a mile away. I wonder what it’s like there when the wind is right?
At this moment I was reminded of an incident from my childhood when I was visiting a relative who had large hog breeding operation. On the day I was there the wind was out of the northeast, sending the smell of the hog lot over and into the house. When I asked what the smell was my uncle said, “That’s the smell of money!” And so it was.
Today, that Peach Ripple smell is the smell of money, lots of money, including a lot of public money coming from government subsidies, as we have reported here. That particular “smell of money,” easy money, is going to become more and more prevalent over time.
While I was home I heard that the plans for that new ethanol and bio-diesel plant, to be built on the eastern edge of my hometown, are coming along well. The local investors in this plant join about 300 other groups currently developing simiiar projects across the United States.
At this time there are about 100 ethanol plants operating in the U.S. with about 50 more under construction. This year those plants will consume nearly one-fifth of the total U.S. corn crop. How much corn will it take to feed all of the the nation’s ethanol plants if even half of those now in the planning stages ever come on line? This writer believes that Star Pheonix Base readers can do the math here, and begin to see what will likely happen to commodity prices, too, as time goes by.
Corn futures prices have gone up about 50 percent since mid-summer and are nearing the $3.00 per-bushel level. Current estimates are that whatever surplus corn there is now will be gone in a couple of years and that corn production is going to have ramp up, and quickly, if prices are not to go through the roof.
However, any short-term increase in corn production is going to come at the expense of soybeans because that commodity is in rotation with corn, on the same land, throughout the midwest. Since all truly productive U.S. agricultural land is already in production, any increase in the planting of corn will cut the planting of soybeans automatically. So, soybean futures are trending up, too, along with the prices of every food product depending on either corn or soybeans, which is most of them, eventually.
As you can see, the future for corn-ethanol looks bright, though perhaps not as bright for some of us as for others. But it all smells the same, I’m afraid, and it smells just like money.