Upping the Ante
Upping the Ante. I’m Greg Martin with today’s Line On Agriculture.
A lot of people at the gas station are scratching their heads over increased costs and asking why. Answers are not very conclusive nor convincing as oil speculation really has more to do with it than actual supply and demand. So when and how are we going to cut the oil pipeline? Big question and the answer may lie in ethanol and in the amount of ethanol that is being blended into gasoline. The Food and Agricultural Policy Research Institute’s lead author on a new E-15 study says the higher ethanol blend is not an industry cure-all - but can help in the transition to E-85. FAPRI’s Seth Meyer says 15-percent ethanol blends delay but don’t eliminate the need to go to E-85 later on during the renewable fuels mandate.
MEYER: The ability to move to a 15% blend pushed that blending wall out a little bit but you still end up at the same place towards the end of the period we’re looking at which is still that we are going to need to push those ethanol prices down.
Still - Meyer says E-15 allows more time to prepare markets and equipment and adjust pricing to deliver E-85. One thing E-15 will not do - Meyer argues in the FAPRI report - is significantly raise corn prices.
MEYER: That .04 on corn price is quite modest and so your net change on consumer expenditures is incredibly small so to the extent that our assumptions about the transition from E10 to E15 are correct, what we show for consumer food price expenditures is quite small.
FAPRI says with E-15 - corn would rise from a baseline price of $4.04 in 2011 to $4.08 in 2018 - and corn demand would go from nearly 5.1-billion bushels to almost 5.3-billion. The bottom line for corn ethanol demand.
MEYER: If it is the mandate supporting this, then this doesn’t have a lot of affect on the volume so in those instances where petroleum prices are not sufficient to hold demand off of the mandate, your gonna – the volumes transacted here are going to essentially be the mandate.
That’s today’s Line On Agriculture. I’m Greg Martin on the Northwest Ag Information Network.
