Wednesday, December 19, 2007


From Today's Papers:

The energy bill also mandates a five-fold increase in ethanol production by 2022
Sigh .....

This particular movement is a poster child for two key elements in U.S. policy making. First, the power of corporations to push their agenda in Congress via the power of regional interests to thwart the needs of the whole. Big agriculture loves this provision because it will boost the price of corn big time while the midwest, which really probably shouldn't be farmed at all, is the recipient of a big Federal wet kiss. Bush's ethanol initiative has already caused a huge price increase in corn with a resulting inflationary response in all food prices.

The second element is ignorance. Making ethanol out of corn is horribly inefficient. The best case scenarios have the energy output barely equaling the energy input to produce ethanol (unlike sugar which is used to great effect in Brazil). But never mind the science, see element number one above.

Let me give you an investment tip. If this bio-energy movement continues, and it looks like it will for the foreseeable future, invest in agricultural commodities. Moo is one of my personal favorites.

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