Agriculture Update

It is obviously apparent that the use of ethanol has, and will continue to push corn prices higher. I don't want to get into the details of this, but you can refer to previous posts on the topic for more information

What I want to do in this email is look at some more side effects that the production of ethanol has on the farming community.

The high price of corn has caused a higher amount of corn to be planted and more acres deterred from other types of crops. In fact, this year we will see the largest corn crop since World War II.

This will push prices up for other farming crops, because the supply will shrink. Last year the amount of wheat acreage dropped 7.3% to 13.81 million acres from 14.9 million acres. We are seeing the same thing happen to soy beans.

We are seeing another side effect in the meat market. Livestock herds are being taken to the slaughter house prematurely because of high expectations in the price of corn, being that corn is the main use of feed for cattle. Expect to see the price of beef rise.

Expect companies that dwell in farm machinery, fertilizer, and seed see increased profits. Also expect other corn based goods, like tortillas to rise in price.

You have to understand that the ethanol policies applied by politicians are highly inflationary, and it's not limited to just corn. It will go through levels. First it was just corn and corn based goods. Then it was the items that go into the production of corn and farmer land values. Now we are watching the effects of land being taken away from the production of other farm goods. Once these items start to effect the consumer more and more, we will see it spread to basically every aspect of life.