07/06/06 High Gasoline Prices Could Mean Profits

High fuel prices are one reason the cost of production for Ag producers has risen sharply over the last year. Market analyst Alan Brugler says those high fuel costs have spilled over into other areas - and are now driving ocean freight rates higher, hurting U.S. Ag exports. But Brugler says those high fuel prices have meant good times for the U.S. ethanol industry - and those good times will stay as long as fuel prices remain near or above current levels. BRUGLER: If we are forced to maintain gasoline prices at these levels for an extended period of time, clearly ethanol is very competitive at this price level. We can pay a lot more for corn than we are now and still see profitability in those ethanol plants. To get a full 10 percent blend of ethanol in all gasoline would take a tremendous amount of additional capacity, even above and beyond what's already in the design stage or the announce stage. So from that standpoint if the fuel market stays high, then yes, we can continue to expand energy consumption of grain products, soybean oil products. But Brugler says if high fuel prices crimp demand and fuel prices fall, the biofuels industry could see tough times. BRUGLER: The fear that I has is that at some point we reach a tipping point where the consumer has cut back his consumption enough through price rationing, getting new fuel efficient vehicles etc, etc, that those energy costs start to decline and then we get into a situation where we've got more and more energy plants, ethanol plants, bio-diesel plants coming online to meet less and less incremental demand. If that happens, then we've got a problem. Now with today's Food Forethought, here's Susan Allen. Potato growers have had it rough these last few years threatened by fad diets and acrylamide scares. The diets and food fears have come and gone and yet the lofty potato remains a staple in the American diet. In hindsight, it is almost comical to think that a gullible public believed claims of groups like The Center for Science in Public Interest, simply because of the word "Science" was in part of their name when the science involved in was so shoddy. The council for Agricultural Science and Technology, a non profit group of scientific societies, where the word "science" accounts for something, reviewed the claim that acrylamides were harmful and concluded there was "scant evidence to support it". To elevate fears over acrylamides once and for all, the group Consumer Freedom reports a person of average weight would have to eat over 62 pounds of chips or 182 pounds of fries everyday for their entire life to be in any danger. I would be worrying more about diabetes. Thanks Susan. That's today's Northwest Report. I'm Greg Martin on the Northwest Ag Information Network.