Ethanol and Grain prices

[Jagfarms]

Where would the grain prices be now if it was not for
Ethanol? I would hate to see where they would be at.

[charliep]

Will let others answer your question.

An interesting thing I follow is how closely crop prices follow crude oil since the link has been made via biofuels.

Current $80/barrel crude equals $3.70/bu corn. In the past, the relationship has been closer with $80/barrel oil equaling $4/bu corn, $140/barrel oil equaling $7/bu corn, etc.

Soybean oil has been a closer relationship with 40 cent/lb bean oil equating to $80/barrel oil and 70 cents/lb equating to the $140/barrel oil of two years ago.

[charliep]

Perhaps the other thing to consider in your question is the fact Canada has become a petro currency. $80/barrel likely is a major factor in having a par dollar with the US. Corn at USD $3.75/bu equals Cdn $3.75/bu. If you assume lower oil prices and an 80 cent loonie (down with oil prices), then corn prices could drop to $3/bu. USD $3/bu corn with an 80 cent loonie (multiply by 1.25) equates to cdn $3.75/bu corn this side of the border.

Things get complicated fast in the new world.

[Fransisco]

And where would grain prices be if we had an 80 cent dollar? Thank-you Bank of Canada.

[Fransisco]

Oops, sorry charlie already made the point.

[charliep]

Just got off a conference call and the point was made that soyoil (and from there canola) will be much more correlated to crude oil prices than corn. The increase in corn acres (watch march 31 USDA seeding intentions) will mean adequate supplies of corn in a sluggish livestock and export demand situation and therefore less correlation with crude (ethanol industry won't have to compete as much. Ugly weather this summer that impacted US corn production would change this rapidly. Bio diesel demand of Europe and the US will remain strong.