Going Green

Wednesday, February 20, 2008

Corn/Oil Price Linkages and Farm Decision-making

OK. This one is a bit complex and certainly, at least for a non-economist, difficult to follow. Essentially, it discusses the linkage between the ethanol subsidy, the price of oil, and the amount of ethanol produced -- as well as the cost of that subsidy to the consumer at various oil price levels. Corn prices and oil prices are now closely correlated whereas prior to the ethanol mandates, that was not necessarily the case. In the future, a corn farmer may decide how much corn to plant based on projected oil prices, not loan rates, defficiency payments, export markets, etc.

Policies key as ethanol 'revolution' links agriculture, energy sectors

WEST LAFAYETTE, Ind. - The recent boom in production of ethanol from corn grain has tightly linked the agriculture and energy sectors in an unprecedented fashion.

Purdue University researchers developed a model, based on a range of possible oil prices, that predicts impacts of federal economic policies on future consumer and government costs, ethanol production and many other aspects of the two sectors.

"We are living through a...(complete article here).

No comments: