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272 comments on DrumBeat: June 25, 2008

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Gail the Actuary on June 25, 2008 - 9:28am Permalink | Subthread | Comments top

Some ethanol stories. It sounds like full steam ahead, regardless of the consequences, at least on these pieces.

Biofuel Bean Counters Forget to Count the Beans

When the president’s top bean counters at the Council of Economic Advisers rushed to downplay ethanol’s impact on food inflation, they forgot to count the beans. . .

The problem? It didn’t count the impact of biodiesel production, which uses soybeans as its main feedstock, according to USDA chief economist Joseph Glauber. It also didn’t count the impact higher soybean prices have had on global food prices.

It turns out that makes a difference. In the past year the price of soybeans, one of America’s biggest crops, has soared as more of the beans were used for biodiesel and since fewer acres of beans were planted last year to accommodate more acres of corn for corn-ethanol.

Sweet Sugar Ethanol Coming Stateside

The American ethanol industry, the world’s largest, is about to get a little sweeter. Louisiana Green Fuels (LGF), an international investment group, says it is on schedule to open up the first commercial sucrose-to-ethanol plant in America. LGF, which is 80 percent owned by Inverandino, a Colombian business group, tells Earth2Tech it plans to have four ethanol plants and three sugar mills in operation in Louisiana in the next 10 years pumping out 100 million gallons of sugar-based ethanol a year.

Oil-Dependent Japan Tries Turning Rice Into Fuel

While the country imports most of its raw materials and food, it is self-sufficient in rice production, and even has a surplus. A change in the Japanese diet has significantly reduced rice consumption over the past decades, but government subsidies and farmers' persistence have kept rice farming popular. Warehouses are brimming with rice and the countryside is dotted with rice paddies left fallow or converted temporarily to other crops to prevent overproduction.

"We have the land, people and technology to make this happen in Japan," says Shigenori Morita, a professor of agriculture at the University of Tokyo.

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BrianT on June 25, 2008 - 9:38am Permalink | Subthread | Parent | Comments top

It might have already been mentioned, but another side effect of ethanol production is the eventual decline in consumption of sugar and corn syrup in North America. This would result in a pretty large health benefit. These products are currently way too cheap considering all the health care costs associated with them.

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x on June 25, 2008 - 10:09am Permalink | Subthread | Parent | Comments top

There are big health benefits to reduced use of corn for corn syrup, meat and eggs.

Citing global impacts for ethanol use is a straw man argument since in the Post Peak Oil world exports of corn will have to be reduced anyway because of lack of transport fuel. We can not afford to continue to ship a low value course grain around the world for animal feed and ethanol use IMO.

Other countries will have to figure out their own energy solutions using the resources they have available just like we do. We have large corn resources that are currently being misallocated to high fructose corn syrup, excessive animal feeding as the the result of cheap subsidized corn over many years and exports of the same cheap corn.

This all has to change and the change will not be easy for those who are in the animal feeding business or are exporting corn. Unless meat and other animal product prices rise dramatically, ethanol will out bid them for corn as ethanol prices rise in line with high gas prices.

The scary ELM is powering this change. Ethanol producers are under stress but then so are oil refiners. Change isn't easy, but there is no other way to maximize the utility of available resources.

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AlanfromBigEasy on June 25, 2008 - 10:33am Permalink | Subthread | Parent | Comments top

but there is no other way to maximize the utility of available resources

YES THERE IS !!

Repeal the 50 cents/gallon corn ethanol subsidy, and lower the tariff on imported ethanol.

Alan

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knightrd on June 25, 2008 - 10:39am Permalink | Subthread | Parent | Comments top

Better yet, eliminate ethanol entirely. Ethanol amounts to pandering and handouts to farmers, with no real advantage. Invest in nuclear and wind to build support for an upcoming electric vehicle fleet. It amazes me that such stupid technologies are allowed to continue. If we were using sugar cane instead of corn and willing to sacrifice a lot of protected lands that would have the right climate, then ethanol might make more sense. Corn ethanol is insane.

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Robert Marston on June 25, 2008 - 2:38pm Permalink | Subthread | Parent | Comments top

And this will help our current accounts problem, how?

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Dezakin on June 25, 2008 - 4:25pm Permalink | Subthread | Parent | Comments top

Sorry, I'm entirely ignorant of the politics behind this. Whats the problem?

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rlaws on June 25, 2008 - 4:51pm Permalink | Subthread | Parent | Comments top

The current account is the difference between exports and imports. Atm America imports more than it exports hence the current account is in deficit. Importing more ethanol will increase the deficit.

This argument is pretty useless in regards to ethanol though, given the large comparative advantages enjoyed by some producers compared to inefficient American corn ethanol.

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Dezakin on June 25, 2008 - 6:13pm Permalink | Subthread | Parent | Comments top

I know what current accounts are, I just never had anyone explain to me why its a problem.

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enemy of state on June 25, 2008 - 10:28pm Permalink | Subthread | Parent | Comments top

If we import (rather than locally produce) Ethanol, presumably it displaces imported oil, or oil products. Assuming we only import ethanol which is actually cheaper than the oil it replaces that would be a net reduction of imports. But, probably more importantly we would have more farm produce to export. It sounds to be like either win-win or maybe draw-win.

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islandboy on June 25, 2008 - 10:56am Permalink | Subthread | Parent | Comments top

I made more or less the exact point in response to a graph from the Economist titles "Betting the farm", posted by Richard in the Jun 19 drumbeat. The graph showed sugar beet as needing the lowest % of arable land to produce 5% of transportation fuels. I pointed to the abundance of sweet crap available in US and UK supermarkets and convenience stores that, I had observed on recent visits to both countries. With the ONLY nutritional value of sugar being raw energy and it's rfairly obvious surplus in the western diet, it is one food we could probably use less of.

There is going to be some resistance to this idea coming from the soft drink and confectionery industries. My bias is that I live in a country that had sugar as a mainstay of it's economy for a couple of centuries before the advent of sugar beet.

Here's hoping for less sugar and more ethanol!

Alan from the islands

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john15 on June 25, 2008 - 12:54pm Permalink | Subthread | Parent | Comments top

It might have already been mentioned, but another side effect of ethanol production is the eventual decline in consumption of sugar and corn syrup in North America.

tell me about it. I"m paying $1.65 for a 20 ounce soda.

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kdolliso on June 25, 2008 - 1:21pm Permalink | Subthread | Parent | Comments top

Your 20 oz. soda has about $0.04 corn in it.

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izzy on June 25, 2008 - 9:17pm Permalink | Subthread | Parent | Comments top

Amazing but true.

http://www.beverage-digest.com/cgi-bin/hfcs.cgi

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earldaily on June 25, 2008 - 11:53pm Permalink | Subthread | Parent | Comments top

wow
no idea my personal battle on hfcs was this steep

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majorian on June 26, 2008 - 1:01am Permalink | Subthread | Parent | Comments top

Gail,
A question for you in your capacity as an actuary.
When you reach 65 the government life expectancy tables says you have ~20 years left. Is this a 50% probability? Is there a table for a 10% probability at maybe 30 years left? Sorry to be off topic but I'm doing some planning and would like to see what kind of safety factor is in those tables. Thanks.

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JimK on June 26, 2008 - 9:10am Permalink | Subthread | Parent | Comments top

I've been playing with financial models that combine uncertainty about time of death along with uncertainties about returns on various investments. Here is one source I found for some statistics about death:

http://www.cdc.gov/nchs/datawh/statab/unpubd/mortabs.htm

What I haven't managed yet is to correlate assets with health, or maybe expenses with health. One question is, how much does it make sense to spend on preventative care, like better food or replacing running shoes more often etc. The other question is how to estimate and manage the occasional crisis, e.g. medical insurance etc.

Of course, the world is always changing, and probably more so in the coming decades. Past performance is no guarantee of future returns!

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272 comments on DrumBeat: June 25, 2008

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