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Strategies & Market Trends : The Epic American Credit and Bond Bubble Laboratory -- Ignore unavailable to you. Want to Upgrade?

To: Paul Kern who wrote (89545)	12/12/2007 4:17:43 PM
From: tdl4138	Respond to of 110194

There's a very logical explanation why "grains" have been doubling in price that few people have figured out. It starts with the ethanol craze that everyone knows simply isn't viable....yet the government pushes. The reality of it all is that it's inherently tied to the current farm bill stuck in congress and the ongoing WTO talks. Ethanol created a huge demand for corn and farmers were forced by the market to switch from wheat, soybeans, etc and plant as many acres of corn as possible. The government encouraged it with subsidies. In the process, the new 2007 farm bill was being debated. At the same time, trade talks at the WTO were stuck due to the complaint that our government subsidized our farmers unfairly. The fact that they did also didn't appear to be relevant. The bottom line is that corn/ethanol subsidies are now being declared primarily "energy subsidies" and not the centerpiece of the new "farm bill". Since we are planting record acres of corn and demand has increased for other grains like wheat and soybeans, the prices on all grains have doubled. The new farm bill in congress is centered now around "conservation" and lowering the maximum amount a farming entity can collect in the form of a subsidy, from millions of dollars to a cap of $200K. That will, coincidentally...appease the WTO. By focusing on a truly ludicrous ethanol initiative, the government has indirectly solved several issues. How do you justify continuing million dollar subsidies to farmers that are receiving 2-3 times what they received just 2 years ago? Sure, their costs have increased, but when your product more than doubles you can withstand some higher costs. Tractors don't burn much diesel once the crop is planted. Ethanol doesn't have to be economically viable. It just has to serve a purpose....In effect, the marketplace is now subsidizing our farmers and not the government.