Agricultural Economics

The ethanol industry is supported by three primary government incentives: a mandate that requires refiners to use an increasing amount of ethanol each year; a 51-cent-per-gallon tax credit for refiners that add ethanol to gasoline; and a 54-cent-per-gallon tariff on imported ethanol.Artical found at:http://www.bread.org/press-room/news/ethanol-incentives-don-t-fuel-food-costs-senate-told.html

Petroliums effects on our local economy.

Petroleum has an absolute effect on our local and global economy in every aspect. It is how we harvest; get food to harvest, so on and so forth. It also is in direct competition with commodities such as corn due to the fact that corn can easily be turned into fuel as a substitute (Biodiesel) to petroleum.The price in my local economy for gas fell from near 5$ per gallon in (June 08) to 1.91$ per gallon where it stands today (December 08) as I write this article. How does this affect our local farming economy? To answer this we must delve deeper into the issue, which I will, but first ill answer the question. Farmers plant their crops in the spring. Small farmers do not sell on the futures market. When a farmer plants corn, his primary cost is seed and fuel. When a farmer plants in the spring paying over $5 per gallon for diesel, along with seed prices for corn at an all time high, and Harvests his crops at $3 per gallon for diesel and corn prices at the lowest its been in 2 years. The farmer is lucky to break even at best.At the same time, this same fuel has affected the beef industry. Why? Corn! With corn prices skyrocketing out of control due to government incentive to large corporations to produce Ethanol, beef farmers had to decide what to do with their cows when the dwindling profits of farming fell out of control due to the corn prices. What did they due? Most sent them to market early. This created a very low beef price early but in 12 months we will have an all time high beef price. Why? Few mature cows will be sent to market. Farmers had to wait for the beef prices to increase before continuing. When they cashed in on their crop hoping that in 12 months the prices would increase to where they could afford to raise cattle again.Why has corn affected our economy so much? Its only one commodity right?Yes, true, corn is only one commodity, but it’s a big one. We feed eat it, make cereals with it, feed most animals off of it, and can also put it in our tank and drive to work on it. Now normally it wouldn’t affect the economy so much as it has but sometimes supply and demand gets thrown off by and even larger force.GOVERNMENT INTERVENTION!!!!The government pays companies to produce ethanol, why, because its much more costly than petroleum. Therefore they are taking corn out of the environment and putting it into our gas tank. But in the mean time for the first time in our nations history we are importing grains and wheat. Never have we had to do this, why now? Because of the sectoral shift in the farming industries. Farmers that grew soy and wheat, now grow corn, due to the huge demand for ethanol production wich is been solely affected by the government interventions and subsidies for this fuel which is not needed!!!WHAT DOES THIS MEAN???This means that all these government interventions and subsidies have been affecting our food cost. What they don’t tell you in these articles is the effect on our national economy in regards to food production. President Bush’s incentives to have 20% of our fuel consumption to be from Ethanol, which comes straight from our pockets. Any time you use corn to produce ethanol, you lose money. There is a reason that ethanol has to be subsidized, it cant make it on itself. It costs more to produce Ethanol than it produces. Another word you use 5$ worth of corn to get 3$ worth of fuel. More on this later!!!!Here is just one published articles in regards to ethanol.http://www.energy.ca.gov/reports/2004-02-03_600-04-001.PDFhttp://domesticfuel.com/2007/07/31/government-incentives-key-to-ethanol-expansion/Here are some good words of wisdom, (NOT) from these articals.Effect of Federal IncentivesThe federal ethanol fuel incentives, primarily the reduced excise tax on ethanol/gasoline blends, are generally acknowledged as the driving force for ethanol production and use in the U.S. As originally intended by Congress, this incentive (or subsidy) has made ethanol competitive with gasoline and other gasoline blending components in the marketplace. Without this long-standing federal energy policy, it is highly unlikely that ethanol production and use in the U.S. would have reached its current level. The small producer credit contributes to an industry trend toward more producers and smaller plant sizes. And the tariff on most imported ethanol protects domestic producers against a large share of the U.S. ethanol fuel market being captured by lower-cost foreign producers. Right now, 98 percent of the ethanol produced in the U.S. is made from corn. But in order to meet the 2005 federal mandate of 7.5 billion gallons of ethanol a year by 2012… and then President Bush’s lofty goal of a 20 percent reduction in gasoline usage by 2017… and possibly now the U.S. Senate’s latest proposal of 36 billion gallons of biofuels by 2022 (with 21 billion gallons coming from something other than corn), it’s obvious there will have to be something other than corn fueling the green fuel. That’s where government incentives come in.

Mission

It’s my mission to clarify some misunderstandings we may have with our agricultural economy and the happenings as our economy is related to the local farming community. Through which both you and I can develop a better understanding about both our national/world economy and its effects on our local economy in regards to farming. In other words, what’s happening to the farmers as our global economy settles in for a long recession.