Iowa State takes a different look at the impact of ethanol.
Ethanol: A Welfare-Increasing Market Distortion?
Xiaodong Du, Dermot J. Hayes, Mindy L. BakerOctober 2008 [08-WP 480]
This study estimates the welfare changes for consumers and producers resulting from ethanol production and related support polices in 2007. The results suggest a positive welfare gain from the support policies; this is possible because ethanol subsidies effectively replaced a market distortion that had a larger deadweight loss. Previous farm subsidies created overproduction, which then depressed market prices and increased the cost of maintaining target-price supports. Ethanol polices resulted in additional ethanol production, but because this additional ethanol was sold in price elastic energy markets, the price depressing impact of the government supports was less than before. This resulted in lower government spending and a net welfare gain of $2.65 billion for given market parameters. The results are...(complete news release and link to study here).
Showing posts with label economics. Show all posts
Showing posts with label economics. Show all posts
Tuesday, October 21, 2008
Wednesday, September 24, 2008
Jobs in "Green" Industries
New industries created around emerging energy technologies as well as waste and water management will be a source of many new jobs in the coming years.
Landmark New Report Says Emerging Green Economy
New York (ILO News),24 Septembre 2008-A new, landmark study on the impact of an emerging global "green economy" on the world of work says efforts to tackle climate change could result in the creation of millions of new "green jobs" in the coming decades.
The new report entitled Green Jobs: Towards Decent work in a Sustainable, Low-Carbon World, says...(complete news release here).
Landmark New Report Says Emerging Green Economy
New York (ILO News),24 Septembre 2008-A new, landmark study on the impact of an emerging global "green economy" on the world of work says efforts to tackle climate change could result in the creation of millions of new "green jobs" in the coming decades.
The new report entitled Green Jobs: Towards Decent work in a Sustainable, Low-Carbon World, says...(complete news release here).
Monday, July 28, 2008
Overseas Fuel Subsidy Impact on U.S. Economy
Fuel subsidies create an artificial intersection of the Supply and Demand curves in many foreign markets. Theoretically, they stimulate the Demand side of the equation. This means less fuel available for the U.S. market -- affecting our Supply side of the equation and thus pushing prices higher. I suspect that the impact to removing such subsidies would be negative to the U.S. economy -- not positive. The reason I believe this is that the subsidies help to stimulate economies of countries such as China and Indonesia. Their strong economies increase demand in areas other than fuel. Their growth can be our opportunity if we will take advantage of it.
Fuel Subsidies Overseas Take a Toll on U.S.
By KEITH BRADSHER
Published: July 28, 2008
JAKARTA, Indonesia — To understand why fuel prices in the United States have soared over the last year, it helps to talk to the captain of a battered wooden freighter here.
He pays just $2.30 a gallon for diesel, the same price Indonesian motorists pay for regular gasoline. His vessel burns diesel by the barrel, so when the government prepared for a limited price increase this spring, he took to the streets to protest.
“If the government increases the price...(complete article here).
Fuel Subsidies Overseas Take a Toll on U.S.
By KEITH BRADSHER
Published: July 28, 2008
JAKARTA, Indonesia — To understand why fuel prices in the United States have soared over the last year, it helps to talk to the captain of a battered wooden freighter here.
He pays just $2.30 a gallon for diesel, the same price Indonesian motorists pay for regular gasoline. His vessel burns diesel by the barrel, so when the government prepared for a limited price increase this spring, he took to the streets to protest.
“If the government increases the price...(complete article here).
Friday, May 30, 2008
Wednesday, May 28, 2008
Causes Behind the "World Food Crisis"
The article linked below is an interesting look at the "Global Food Crisis" and its causes. One thing to note is that there seems to be more than adequate food available to feed the world. It is an issue of price, not availability. What is driving world food prices up if supply exceeds demand? That is the real question which must be addressed.
Anup Shah, Global Food Crisis 2008, GlobalIssues.org, Created: Tuesday, May 27, 2008
Tuesday, May 6, 2008
Texas RRC Commission Chair: Further Thoughts on Global Warming
Texas Railroad Commission Chairman, Michael Williams, continues his post on Global Warming....
Global warming II
May 5, 2008
More and more research is coming in concluding that, like everything else, there’s no free lunch with federal cap and trade legislation.
The federal Energy Information Agency took a look at S. 2191, the Lieberman-Warner bill. In its April report, EIA concluded:
1. Hold on to your pocketbook. Consumer energy bills will...(complete article here).
Global warming II
May 5, 2008
More and more research is coming in concluding that, like everything else, there’s no free lunch with federal cap and trade legislation.
The federal Energy Information Agency took a look at S. 2191, the Lieberman-Warner bill. In its April report, EIA concluded:
1. Hold on to your pocketbook. Consumer energy bills will...(complete article here).
Friday, May 2, 2008
USDA Report on Factor Affecting Food Prices
Food commodity prices are determined by the complex interaction of many economic forces. This report from the USDA provides a good comprehensive look at those factors.
Global Agricultural Supply and Demand: Factors Contributing to the Recent Increase in Food Commodity Prices
By Ronald Trostle
Outlook Report No. (WRS-0801) 30 pp, May 2008
World market prices for major food commodities such as grains and vegetable oils have risen sharply to historic highs of more than 60 percent above levels just 2 years ago. Many factors have contributed to the runup in food commodity prices. Some factors reflect trends of slower growth in production and more rapid growth in demand, which have contributed to a tightening of world balances of grains and oilseeds over the last decade. Recent factors that have further tightened world markets include increased global demand for biofuels feedstocks and adverse weather conditions in 2006 and 2007 in some major grain and oilseed producing areas. Other factors that have added to global food commodity price inflation include the declining value of the U.S. dollar, rising energy prices, increasing agricultural costs of production, growing foreign exchange holdings by major food importing countries, and policies adopted recently by some exporting and importing countries to mitigate their own food price inflation. (Access the complete report here.)
Global Agricultural Supply and Demand: Factors Contributing to the Recent Increase in Food Commodity Prices
By Ronald Trostle
Outlook Report No. (WRS-0801) 30 pp, May 2008
World market prices for major food commodities such as grains and vegetable oils have risen sharply to historic highs of more than 60 percent above levels just 2 years ago. Many factors have contributed to the runup in food commodity prices. Some factors reflect trends of slower growth in production and more rapid growth in demand, which have contributed to a tightening of world balances of grains and oilseeds over the last decade. Recent factors that have further tightened world markets include increased global demand for biofuels feedstocks and adverse weather conditions in 2006 and 2007 in some major grain and oilseed producing areas. Other factors that have added to global food commodity price inflation include the declining value of the U.S. dollar, rising energy prices, increasing agricultural costs of production, growing foreign exchange holdings by major food importing countries, and policies adopted recently by some exporting and importing countries to mitigate their own food price inflation. (Access the complete report here.)
Tuesday, April 15, 2008
Friday, April 11, 2008
Human Behavior's Impact on Food Prices
Below is linked a thoughtful article on the rising price of basic food grains throughout the world. There is only one factor discussed with which I would take exception. That is the impact of biofuels on the prices of wheat and rice. Although there could arguably be a point at which competition for acres will impact production of these two crops, I do not believe that it has occurred at this point.
Traditionally, in the U.S., corn is primarily destined for cattle feed. In the southern part of the wheat growing areas of the country -- such as Texas and Oklahoma -- cattle often graze wheat pasture (stocker phase) prior to entering the feed lot for finishing. The cattle are removed from the wheat pasture at an early date so that the wheat can continue to mature and produce grain. These are complementary enterprises. With the high prices for corn due to competing demands from ethanol production, it would be assumed that cattle would remain in this stocker phase of production longer -- thus taking the wheat acreage out of harvest for grain. High prices for wheat have actually had the opposite effect. Farmers are electing to forego income from stocker cattle in the hopes of harvesting even more wheat from their planted acres. This is a purely economic decision on the part of the farmers who often lease their land to cattlemen for grazing.
My point is that in spite of the potential for ethanol production taking acreage away from wheat production, it has not in fact occurred due to other market factors. If allowed to operate, free enterprise will allocate resources in the most efficient manner possible. Rising food prices are certainly a part of that mechanism, but they are not the driving force. Fuel prices are driving the issue and they are a function of many factors. (see this post)
How Countries Worsen the Food Price Crisis
By Kent Garber
Since early 2007, when food prices began marching noticeably upward, there have been violent riots in more than a dozen countries, growing malaise in developed areas, including the United States, and a fluid debate about the origins of the spike. On the last point, a consensus has emerged. A slew of factors--record fuel prices, ethanol production, unprecedented demand, the effects of climate change--have been blamed, creating a sort of perfect storm for the world's food supply.
Although each merits attention, another culprit must now be added: the human reaction to the crisis.
Since the first of the year, additional jumps in food prices have bred not only uneasiness and widespread fear but also...(complete article here).
Traditionally, in the U.S., corn is primarily destined for cattle feed. In the southern part of the wheat growing areas of the country -- such as Texas and Oklahoma -- cattle often graze wheat pasture (stocker phase) prior to entering the feed lot for finishing. The cattle are removed from the wheat pasture at an early date so that the wheat can continue to mature and produce grain. These are complementary enterprises. With the high prices for corn due to competing demands from ethanol production, it would be assumed that cattle would remain in this stocker phase of production longer -- thus taking the wheat acreage out of harvest for grain. High prices for wheat have actually had the opposite effect. Farmers are electing to forego income from stocker cattle in the hopes of harvesting even more wheat from their planted acres. This is a purely economic decision on the part of the farmers who often lease their land to cattlemen for grazing.
My point is that in spite of the potential for ethanol production taking acreage away from wheat production, it has not in fact occurred due to other market factors. If allowed to operate, free enterprise will allocate resources in the most efficient manner possible. Rising food prices are certainly a part of that mechanism, but they are not the driving force. Fuel prices are driving the issue and they are a function of many factors. (see this post)
How Countries Worsen the Food Price Crisis
By Kent Garber
Since early 2007, when food prices began marching noticeably upward, there have been violent riots in more than a dozen countries, growing malaise in developed areas, including the United States, and a fluid debate about the origins of the spike. On the last point, a consensus has emerged. A slew of factors--record fuel prices, ethanol production, unprecedented demand, the effects of climate change--have been blamed, creating a sort of perfect storm for the world's food supply.
Although each merits attention, another culprit must now be added: the human reaction to the crisis.
Since the first of the year, additional jumps in food prices have bred not only uneasiness and widespread fear but also...(complete article here).
Monday, March 10, 2008
Switchgrass Production Costs
With all of the interest in cellulosic ethanol, switchgrass production will be the focus of many who are looking to capture part of the opportunity.
Scientists Determine Farm Costs of Producing Switchgrass for Ethanol
By Jan Suszkiw
March 6, 2008
Following up on a net-energy study published in the January Proceedings of the National Academy of Sciences (PNAS), a team of Agricultural Research Service (ARS) and University of Nebraska-Lincoln (UNL) scientists today reports the on-farm economic costs of producing switchgrass for cellulosic ethanol.
In their PNAS energy-analysis paper, the team...(complete article here).
Scientists Determine Farm Costs of Producing Switchgrass for Ethanol
By Jan Suszkiw
March 6, 2008
Following up on a net-energy study published in the January Proceedings of the National Academy of Sciences (PNAS), a team of Agricultural Research Service (ARS) and University of Nebraska-Lincoln (UNL) scientists today reports the on-farm economic costs of producing switchgrass for cellulosic ethanol.
In their PNAS energy-analysis paper, the team...(complete article here).
Tuesday, March 4, 2008
Balancing Security, Sustainability and Supply of Energy
From MIT...
Expert says big energy picture must balance security, sustainability, and supply
Deborah Halber, News Office Correspondent
March 3, 2008
The world has no choice but to build more energy-producing plants--and find new sources of energy--but the build out process will not happen overnight, a government expert recently told an MIT audience.
A worldwide boost in demand for energy, coupled with environmental concerns, will force a huge U.S. increase inthe number of nuclear power plants--but it will take more than two decades to...(complete article here).
It's going to be interesting.
Expert says big energy picture must balance security, sustainability, and supply
Deborah Halber, News Office Correspondent
March 3, 2008
The world has no choice but to build more energy-producing plants--and find new sources of energy--but the build out process will not happen overnight, a government expert recently told an MIT audience.
A worldwide boost in demand for energy, coupled with environmental concerns, will force a huge U.S. increase inthe number of nuclear power plants--but it will take more than two decades to...(complete article here).
It's going to be interesting.
Friday, February 29, 2008
Economic Feasibility of Ethanol From Sugar Crops
This research out of LSU indicates that, at least for now, corn is the most economically feasible feedstock for ethanol production in the U.S.
The Economic Feasibility of Ethanol Production from Sugar Crops
Michael E. Salassi
Ethanol is a high-octane fuel used primarily as a gasoline additive and extender. Since the late 1970s, methyl tertiary butyl ether (MTBE) has replaced lead as the primary gasoline additive in the United States. Over the past few years, however, several states have banned the use of MTBE as a gasoline additive because of its environmental problems resulting in groundwater contamination. The reduction in use of MTBE and recent surging prices for petroleum-based fuels are dramatically increasing the demand for ethanol and the interest in ethanol production in the United States.
Ethanol can be produced from carbohydrates such as...(complete article here).
The Economic Feasibility of Ethanol Production from Sugar Crops
Michael E. Salassi
Ethanol is a high-octane fuel used primarily as a gasoline additive and extender. Since the late 1970s, methyl tertiary butyl ether (MTBE) has replaced lead as the primary gasoline additive in the United States. Over the past few years, however, several states have banned the use of MTBE as a gasoline additive because of its environmental problems resulting in groundwater contamination. The reduction in use of MTBE and recent surging prices for petroleum-based fuels are dramatically increasing the demand for ethanol and the interest in ethanol production in the United States.
Ethanol can be produced from carbohydrates such as...(complete article here).
Thursday, February 28, 2008
Batteries: Future Fortunes
Batteries. Where fortunes will be made....
Cracking The Battery Barrier
Melanie Lindner, 02.28.08, 12:30 PM ET
Wouldn't it be great if you didn't have to worry about your cellphone losing its charge? How about your laptop, MP3 player, even your car?
While the global battery market is enormous--some $55 billion, according to...(complete article here).
Cracking The Battery Barrier
Melanie Lindner, 02.28.08, 12:30 PM ET
Wouldn't it be great if you didn't have to worry about your cellphone losing its charge? How about your laptop, MP3 player, even your car?
While the global battery market is enormous--some $55 billion, according to...(complete article here).
Friday, February 22, 2008
Where Is The Beef?
Cattle producers are facing a wild-and-crazy ride over the coming months. This year promises to be even more unpredictable than the last few.
A number of factors will significantly impact cattlemen and livestock markets. One of the big ones is that it is an election year. The different political parties have different approaches to how best to manage the economy. They each have different priorities on how our tax dollars are spent. They each have different attitudes toward the role of government (although those differences are not as distinguishable as they once were). The projected and final outcome of first, the primaries, and then the general election, will add volatility to markets that are already bouncing all over the spectrum. It would be nice to have a crystal ball.
Ethanol will continue to be a major factor influencing beef production. The immediate impact is at the feedlot where cost-of-gain is heavily influenced by corn prices. That impact ripples back through the supply chain to impact feeder cattle prices, stocker cattle prices and ultimately cow prices.
Commodity prices, which are currently being driven to a large extent by ethanol, also affect land use allocation on farming operations. Some lands that have traditionally been used for grazing are being shifted to crop production. Crops that are usually grazed, such as wheat in the southern plains states, are now being held back from grazing because the value of the grain production outweighs the value of leasing the crop to pasture cattle. Recent reports indicate that cattle on wheat pasture this winter were over one million head fewer than last year. Part of that was due to drought conditions, but part of it is due to the desire of the farmers to harvest the wheat for grain because of extremely favorable prices.
We still don’t have a Farm Bill. The uncertainty stemming from the lack of a Farm Bill impacts both commodity and livestock prices. We don’t know what payment caps may be placed on direct payments. We don’t know what taxes may be added. We don’t know how much emphasis will be placed on conservation and energy measures. In short, we really don’t know anything until a bill is passed. This may be the single biggest factor for determining markets over the coming year.
What will happen in the export markets? We have dealt with the BSE crisis and with bone fragments in exported beef. We have been negotiating for years with some countries over easing import restrictions. There appears to be some progress, but the outcome is uncertain at best. The level of exports has a tremendous impact on the price of beef.
Drought in some key beef production areas has impacted calf production. The Southeastern U.S. is one of the most important cow/calf areas of the country. A large portion of their cow herd has been liquidated due to drought conditions the last couple of years.
Other trends that are impacting cattle numbers include things like urban sprawl. Many cities and suburbs have expanded into areas that were once prime cattle producing ranches. Central Texas and the Dallas-Fort Worth areas have become covered with housing developments where cattle once grazed. Hunting and other recreational uses have also removed many ranches from production. Often, hunting leases are tied to exclusive use rights – in other words, no cattle grazing in conjunction with the hunting lease. National forest and BLM lands are also under increasing pressure from environmentalists to reduce grazing. Droughts in western states have further reduced the carrying capacity of much of the federally managed lands.
For the beef producer, there may be some glimmer of hope. Reduced cattle inventories will eventually lead to improved prices for those who remain in business – especially if export markets are re-opened. Increased beef prices will help to offset the negative impact of higher feed prices. Higher feed prices will lend toward a shorter feeding period which may contribute to a shortening of the marketing cycle. This should translate into smaller carcasses and an overall reduction in beef production which will further increase beef prices.
For the consumer it looks like higher beef prices are definitely in the future.
A number of factors will significantly impact cattlemen and livestock markets. One of the big ones is that it is an election year. The different political parties have different approaches to how best to manage the economy. They each have different priorities on how our tax dollars are spent. They each have different attitudes toward the role of government (although those differences are not as distinguishable as they once were). The projected and final outcome of first, the primaries, and then the general election, will add volatility to markets that are already bouncing all over the spectrum. It would be nice to have a crystal ball.
Ethanol will continue to be a major factor influencing beef production. The immediate impact is at the feedlot where cost-of-gain is heavily influenced by corn prices. That impact ripples back through the supply chain to impact feeder cattle prices, stocker cattle prices and ultimately cow prices.
Commodity prices, which are currently being driven to a large extent by ethanol, also affect land use allocation on farming operations. Some lands that have traditionally been used for grazing are being shifted to crop production. Crops that are usually grazed, such as wheat in the southern plains states, are now being held back from grazing because the value of the grain production outweighs the value of leasing the crop to pasture cattle. Recent reports indicate that cattle on wheat pasture this winter were over one million head fewer than last year. Part of that was due to drought conditions, but part of it is due to the desire of the farmers to harvest the wheat for grain because of extremely favorable prices.
We still don’t have a Farm Bill. The uncertainty stemming from the lack of a Farm Bill impacts both commodity and livestock prices. We don’t know what payment caps may be placed on direct payments. We don’t know what taxes may be added. We don’t know how much emphasis will be placed on conservation and energy measures. In short, we really don’t know anything until a bill is passed. This may be the single biggest factor for determining markets over the coming year.
What will happen in the export markets? We have dealt with the BSE crisis and with bone fragments in exported beef. We have been negotiating for years with some countries over easing import restrictions. There appears to be some progress, but the outcome is uncertain at best. The level of exports has a tremendous impact on the price of beef.
Drought in some key beef production areas has impacted calf production. The Southeastern U.S. is one of the most important cow/calf areas of the country. A large portion of their cow herd has been liquidated due to drought conditions the last couple of years.
Other trends that are impacting cattle numbers include things like urban sprawl. Many cities and suburbs have expanded into areas that were once prime cattle producing ranches. Central Texas and the Dallas-Fort Worth areas have become covered with housing developments where cattle once grazed. Hunting and other recreational uses have also removed many ranches from production. Often, hunting leases are tied to exclusive use rights – in other words, no cattle grazing in conjunction with the hunting lease. National forest and BLM lands are also under increasing pressure from environmentalists to reduce grazing. Droughts in western states have further reduced the carrying capacity of much of the federally managed lands.
For the beef producer, there may be some glimmer of hope. Reduced cattle inventories will eventually lead to improved prices for those who remain in business – especially if export markets are re-opened. Increased beef prices will help to offset the negative impact of higher feed prices. Higher feed prices will lend toward a shorter feeding period which may contribute to a shortening of the marketing cycle. This should translate into smaller carcasses and an overall reduction in beef production which will further increase beef prices.
For the consumer it looks like higher beef prices are definitely in the future.
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).
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).
A New Blog for Your Enjoyment
Note the new icon in my sidebar for Blue Island Almanack. It is a blog in which I participate that focuses on current and emerging issues on the economy, education, environment and ethics. Drop by and take a look. Feel free to comment. Be sure and add it to your favorites!
Monday, January 14, 2008
Indonesian Biofuel Woes and Goals
It takes longer to ramp up for higher production levels of palm oil than it does for annual crops such as corn or soybeans....
Indonesia seeks to nearly double biodiesel output
JAKARTA (Reuters) - Indonesian palm oil-based biodiesel output is expected to nearly double to 1.3 million tonnes this year on expected strong demand in the overseas market, a senior industry official said on Monday.
Biodiesel capacity is...(complete article here).
Related article here.
Indonesia seeks to nearly double biodiesel output
JAKARTA (Reuters) - Indonesian palm oil-based biodiesel output is expected to nearly double to 1.3 million tonnes this year on expected strong demand in the overseas market, a senior industry official said on Monday.
Biodiesel capacity is...(complete article here).
Related article here.
Friday, January 11, 2008
Thursday, October 4, 2007
Economic Survey of Mexico
I have linked to the 2007 Economic Survey of Mexico published by the Organisation for Economic Co-Operation and Development (OECD).
Economic survey of Mexico 2007
Although the survey is not directly related to agriculture, it is important due to Mexico's status as a trading partner. The health of the Mexican economy affects immigration, exports, imports, truck traffic, competition, energy, and on and on. We need to pay attention to what is going on in our neighboring countries.
Economic survey of Mexico 2007
Although the survey is not directly related to agriculture, it is important due to Mexico's status as a trading partner. The health of the Mexican economy affects immigration, exports, imports, truck traffic, competition, energy, and on and on. We need to pay attention to what is going on in our neighboring countries.
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