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Sunday, June 19, 2011

Friends in High Places -- Congress Keeps Increasing the Mandate for Ethanol

Link here.

The article is all about the increase in global demand for corn --
Even a fifth consecutive year of record global corn harvests will fail to meet demand for food, fuel and livestock feed, reducing world stockpiles to the lowest in two generations.

Consumption will rise 3 percent in the next marketing year, a 16th consecutive annual gain that saw demand jump 66 percent, according to U.S. Department of Agriculture estimates.

Inventory will drop to 47 days of use, the fewest since 1974, the data show. Waterlogged fields in the U.S., the largest exporter, will curb yields, Goldman Sachs Group Inc. says.

Corn may jump 36 percent to a record $9 a bushel if conditions worsen, Morgan Stanley says. 
Meanwhile, deep in the article --
“If oil prices tank and corn prices stay near a high, then ethanol production is going to recede to the level of the mandate. But the mandate continues to go up.” 
I believe the mandate is now up to 15% ethanol in one grade of gasoline, up from 10% last year, and automobiles back to 2007, or thereabouts will be designated safe to use 15% ethanol.

I believe one saves about a nickel/gallon on ethanol-gasoline.

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