Farm Boyz Rule Ottawa - By Terence Corcoran of Financial Post.

[Fransisco]

Freenorth, do your own homework and back up your own claims.

As far as 'choice' and 'competition' goes I don't see how forcing consumers and motorists through a mandate to buy more expensive(even though its subsidized and tariffed) fuel which may actually decrease air quality accomplishes any of that. But nice try.

And I wouldn't be so sure about the subsidy argument as well. Switching them from grain to ethanol is not eliminating them. But again nice try.

I've said it before and I'll say it again, I don't see a non-subsidized future for these bio fuels, especially wheat based ethanol which is at the bottom of the competitiveness list.

Heck even in Brazil where they can get 5 times the litres of ethanol per acre than we can with wheat they still need a 20% mandate that they lose money on to keep the industry going.

Tom and others have argued Moore's law (think transistors) will save the day. Unfortunately it doesn't apply to bio fuels the inputs of which have been getting more expensive not cheaper.

Lets get back to the 'choice' and 'competition' argument. The ethanol plants in western Canada if given the choice(which they're not)would be going to 100% corn right now. Why? Because of price, you can pretty much get the same amount of ethanol out of a bushel of corn as you can out of a bushel of wheat but corn, as everyone knows, is a whole lot less expensive most of the time and especially these days. Competition and choice are out the window for these guys.

Any farmer that thinks the governments bio fuels initiative is a " free market", "market driven","competition",or "choice" type of policy is mistaken.

If you're in favour of creating artificial demand at someone else's expense then just say so.

I know as well as anyone what all this has done for the bottom line of my grain operation but I'm not going to fool myself or anyone else into believing that any of it is market driven. It's not.

[Fransisco]

The latest edition of the economist seems to agree with me.

http://www.economist.com/opinion/displayStory.cfm?Story_ID=10252015

and

http://www.economist.com/opinion/displaystory.cfm?story_id=10250420

Here's an excerpt, emphasis mine.

<blockquote>
With agflation, policy has reached a new level of self-parody. Take America's supposedly verdant ethanol subsidies. It is not just that they are supporting a relatively dirty version of ethanol (far better to import Brazil's sugar-based liquor); they are also offsetting older grain subsidies that lowered prices by encouraging overproduction. <b>Intervention multiplies like lies.</b> Now countries such as Russia and Venezuela have imposed price controls—an aid to consumers—to offset America's aid to ethanol producers. Meanwhile, high grain prices are persuading people to clear forests to plant more maize. </blockquote>

[just_wondering]

Fransisco> If you're in favour of creating artificial demand at someone Else's expense then just say so
I am in favour of creating demand at some else's expense. The Market does not work in every situation if everyone does not play by the same rules
Biofuels IMHO is now all about not having to rely on brown people to determine the price of energy in the U.S.
You can buy 1 biofuel plant for the price of a Flying fortress and payload. This is NO longer about the farm we are just getting spinoff benefits
From Larry Webers daily report

Ethanol production continues to expand, although at a slower pace than expected a few months ago. Ethanol production margins became very tight in late September, but have rebounded over the past two months. The low margins reflected higher corn prices and much lower ethanol prices. The lower gross margin suggested that some plants were not covering all costs of production. As long as crude oil and unleaded gasoline prices remain high, ethanol prices are expected to remain high enough to generate positive crush margins. LINK

The ethanol plant-announcement surge is probably done . Capacity under construction will mostly be finished within the next nine to 10 months which will put the U.S. industry up to about 13 billion gallons of capacity, and assuming a 15-billion-gallon renewable fuel standard from corn by 2015 that says the corn-starch ethanol industry only expands by about 2 billion in the 2009 to 2015 time frame. The recent slip in ethanol's financial market valuation could also influence the future of the industry, according to analysts. While there may be a public perception that the ADMs, Poets and VeraSuns of the world will be the likely benefactors of an ethanol-industry downturn . . . there still is room for independent producers. DTN Ethanol Center As Yogi Berra said - it ain’t over til its over . . .

The U.S. House on Thursday passed an energy bill that would boost vehicle fuel economy requirements by 40 percent by 2020 and raise ethanol use by five-fold by 2022. But the White House says it will reject the measure in its current form. The centerpiece is an increase in the Corporate Average Fuel Economy standards to 35 miles per gallon (15 km per litre) by 2020. To allay anger from livestock growers and food makers, who have seen corn prices nearly double amid an ethanol boom, the bill caps the amount of corn-blended ethanol at 15 billion gallons. The rest -- 21 billion gallons -- comes from nonfood "cellulosic" sources like switchgrass and wood chips by 2022. LINK

There are some strong signals that Canadian farmer-investors need to view biofuel investments as more than just another value-added proposition for locally grown crops if the legislators have their way.

[Fransisco]

Thank-you for being honest.

Yes, energy security is one of the reasons given in the US for subsidizing ethanol. Seeing as Canada is a net exporter of oil I don't see how the argument holds up at all for us, but lets leave that aside for now and look at the States.

-WARNING- Wheat board supporters are advised to read no further as they will not be able to understand what is being discussed. A language totally foreign and incomprehensible to them known as 'math' will be used.

In 2005 the U.S. imported 3.67 billion barrels of oil.

21.69% came from the Persian Gulf region. This includes Bahrain, Iran, Iraq, Kuwait, Qatar, Saudi Arabia, and the United Arab Emirates. Iran and Qatar export no oil to the United States. Another 12.24% comes from Venezuela.

So that's 34% or 1.25 billion barrels or 52.5 billion gallons of imports coming from what I think we could call high risk areas. Now I suppose to be fair we should factor in that only 51.4% of a barrel ends up as fuel. So assuming the yanks don't need all the other stuff(which they probably do) that means 26.985 billion gallons to try and get from ethanol.

Since we know that you can get 2.5 gallons of ethanol out of a bushel of corn that means they'd need 10.794 billion bushels. And the latest number I could find on the 2007 crop has it coming in at 13.3 billion bushels.

Call me kooky but somehow I don't think leaving just 2.5 billion bushels of corn for everyone else in the Country to fight over is such a good idea.

But wait a minute, I forgot something. It takes energy from an outside source to produce ethanol from corn. Since I'm feeling generous and a little guilty for not doing freenorth's homework for him I'll use the high side of the latest Renewable Fuels Association review of the studies which is an energy return of 1.65 for every 1 unit put in.

Darn it all, now we need another 35% to make up the difference.Instead of 27 billion gallons we need to shoot for 36.4. And therefore, gulp, we need 14.6 billion bushels of corn.

At this point people usually mumble something about how ethanol is only part of the solution to energy security. Riiiight.

[Fransisco]

Now a question of principle.

If you are in favour of government creating artificial demand for your product at someone else's expense. How can you then be opposed to them doing so for someone else at your expense?

For example the comparatively low prices we receive for our wheat thanks to government intervention(CWB)does benefit people. Just not those of us that grow the stuff.

As Corcoran pointed out supply management forces consumers to pay a higher price than they otherwise would. Again government decides who wins and who loses.

The line that markets don't always work is a bogus one. Markets don't work when governments don't let them work. The answer to a market that is being stifled by government intervention is not more government intervention.

Oversupply, and ridiculously low commodity prices for an extended period of time were the result of subsidies and tariffs. Two things which definitely do not fall under the heading of "market forces". You're giving markets the bad rap for what your new buddy government did in the first place.

I know its sometimes hard to see when he's dangling that nice juicy carrot in front of you but next time round that carrot can just as easily be something a lot more unpleasant.

Just ask the guy buying a carton of eggs and a jug of milk after filling up the mini-van with the new ethanol blend. Heck just look at what you're getting paid for your wheat.

Obviously there are a lot of people out there that can convince themselves that oh, this is somehow different. Sorry, but I'm not one of them.

[TOM4CWB]

Fransisco,

Here is a good article that shows there is a logical progression... not to burn all corn up for fuel... but to infact resolve the dependance on black oil from foreign sources off the North American continent.

US House passes energy bill, Bush set to vetoReuters Thursday December 6 2007
(Adds energy savings estimate, comments from Sen. Reid, oil and environmental groups)
By Chris Baltimore
WASHINGTON, Dec 6 (Reuters) - The U.S. House of Representatives on Thursday passed an energy bill that would boost vehicle fuel economy requirements by 40 percent by 2020, raise ethanol use by five-fold by 2022 and impose $13 billion in new taxes on big energy companies.
The centerpiece of the 1,055-page Energy Independence and Security Act is an increase in the Corporate Average Fuel Economy standards to 35 miles per gallon (15 km per liter) by 2020, the first congressional boost in fuel rules since 1975.
The plan -- an amalgam of energy priorities driven by House Speaker Nancy Pelosi -- passed by 235-181 in a mostly party-line vote.
But it faces resistance in the Senate and the White House says it will reject the measure in its current form.
"Their proposal would raise taxes and increase energy prices for Americans," the White House said in a statement. "That is a misguided approach and if it made it to the President's desk, he would veto it."
Analysts say the bill is unlikely to survive intact, but a stripped-down version could become law if controversial tax and renewable electricity provisions are dropped.
Senate Majority Leader Harry Reid said he wants to call a vote on the bill before Congress adjourns later this month.
But Reid said the bill may have to be modified to survive, suggesting the controversial provisions could be dropped. "If we can't get it all, we'll get part of it," he told reporters.
Senate Republicans and the Bush administration say they will block a final bill if it includes a $21.5 billion tax package and a mandate for utilities to get 15 percent of their power from renewable sources like wind and solar by 2020.
Pelosi called the bill "a historic opportunity" and "a shot heard around the world for energy independence," with crude oil prices near $90 a barrel and retail gasoline over $3 a gallon.
Democrats claimed the higher vehicle fuel efficiency standard would eventually reduce U.S. oil demand by 1.1 million barrels a day and save families between $700 and $1,000 in yearly fuel costs.
NO ENERGY BILL
Republicans called it a "no energy bill" because it doesn't open new U.S. acreage to oil and natural gas drilling. They said the bill will do nothing to curb soaring prices for gasoline and home heating fuels.
"The Democratic majority's remarkably undemocratic process has produced a bill that harms more than it helps and has no chance of being signed into law," said Rep. Joe Barton, the top Republican on the Energy and Commerce Committee.
The House bill also contains popular provisions to boost use of renewable fuels like ethanol to 36 billion gallons by 2022. Ethanol, blended mostly from corn in the United States, is popular in Midwest states like Iowa.
But to allay anger from livestock growers and food makers, who have seen corn prices nearly double amid an ethanol boom, the bill caps the amount of corn-blended ethanol at 15 billion gallons. The rest -- 21 billion gallons -- comes from nonfood "cellulosic" sources like switchgrass and wood chips by 2022.
The bill's tax provision -- worth about $21.5 billion over 10 years -- would dangle federal tax incentives for homeowners and businesses to buy new solar arrays, wind turbines and hybrid gas-electric cars.
To foot most of the bill, the House bill repeals about $13 billion in tax subsidies extended to big oil and gas producers like Exxon Mobil Corp, ConocoPhillips and Chevron Corp.
The American Petroleum Institute slammed the House bill, saying it "over-promises" the ability of ethanol to cut oil demand and will likely raise the cost of gasoline.
The Sierra Club said the bill was a dramatic move away from the failed energy policies of the past and "will provide billions for clean energy instead of Big Oil's bottom line." (Additional reporting by Tom Doggett; editing by Marguerita Choy)

http://www.guardian.co.uk/feedarticle?id=7133042

I believe the Harper is well aware of this situation... and can logically and effectively balance the public need to better use our resourses and sustain our environment.

Doing what we are doing now is insanity. WE CAN DO MUCH BETTER!

[Fransisco]

So now you've had a drink from the Al Gore, David Suzuki Kool-aid, eh, Tom. It fits in well with your take on supply management and the GMO ban in Europe.

Is the CWB the only curtailing of freedom and liberty you're opposed too?

[Fransisco]

Funny how many people who otherwise have a low opinion of socialism suddenly forget this when they are the ones living at someone else's expense.

<blockquote>Claude Frédéric Bastiat- Government is the great fiction through which everybody endeavors to live at the expense of everybody else.</blockquote>

[freenorth]

So Francisco were you happier when canola was $6 wheat was $4 and nitrogen
was 26 cents. What's changed since then?

We always respond or react to US farm policy that's why we grow oats and canola. It's not just because they are off the CWB it's also because the US doesn't subsidize them to the same degree as wheat,corn and beans. Similarly with biofuels we are getting into them because there is demand in the U.S. and Europe for them and we are reacting to it.

Canada is an exporter of energy true but we also need to practise being good stewards and leaving things better then we found them and hence we can not ignore the green arguements for biofuels.

Yes it is risky to build a business built around a government subsidy but I would not expect incentives to last long term. The Canadian industry will not get anywhere near as overbuilt in Canada as it may elsewhere. The front runners will have an advantage. There will be successes and failures and consolidation and the sun will come up tomorrow.

[Fransisco]

The green arguments? Good stewards leaving things better than before?

Check out this

http://pubs.acs.org/subscribe/journals/esthag-w/2007/apr/science/ee_ethanol.html

<blockquote>Jacobson, an atmospheric chemist at Stanford University, knew that air quality got worse during Brazil's big ethanol push in the 1970s and that the reason was still unclear.

Jacobson decided to use his sophisticated air-pollution model to put ethanol to the test. Would switching the U.S. fleet to white lightning make the country breathe easier?

His results, published today on ES&T's Research ASAP website (DOI: 10.1021/es062085v), show that ethanol is no silver bullet for health. Switching to E85 blends (85% ethanol, 15% gasoline) could result in slightly higher ozone-related mortality, hospitalization, and asthma (9% higher in Los Angeles and 4% higher in the U.S. as a whole), the study finds. Cancer rates would be similar for gasoline and E85.</blockquote>

and this

<blockquote>
Scientists at Environment Canada studied four vehicles of recent makes, testing their emissions in a range for driving conditions and temperatures.

"Looking at tailpipe emissions, from a greenhouse gas perspective, there really isn't much difference between ethanol and gasoline," said Greg Rideout, head of Environment Canada's toxic emissions research.

"Our results seemed to indicate that with today's vehicles, there's not a lot of difference at the tailpipe with greenhouse gas emissions."

The study found no statistical difference between the greenhouse gas emissions of regular unleaded fuel and 10 per cent ethanol blended fuel.</blockquote>

[Fransisco]

So is it really cleaner burning? Or maybe you just want it to be cleaner burning.

[Fransisco]

Oops, looks like I forgot something else. According to Consumer Reports

<blockquote>Overall fuel economy on the Tahoe dropped from an already low 14 mpg overall to 10. In highway driving, gas mileage decreased from 21 to 15 mpg; in city driving, it dropped from 9 mpg to 7. You could expect a similar decrease in gas mileage in any current flex fuel vehicle because ethanol has a lower energy content than gasoline - 75,670 British thermal units (BTUs) per gallon instead of 115,400 for gasoline, according to the National Highway Traffic Safety Administration. As a result, you have to burn more fuel to generate the same amount of energy.

With the retail pump price of E85 averaging $2.91 per gallon in August, according to the Oil Price Information Service, a 27 percent fuel-economy penalty means drivers would have paid an average of $3.99 for the energy equivalent of a gallon of gasoline. </blockquote>

I'll let you guys do the math but that acreage requirement just went up again.