Re: Midwest Floods Push Grain Prices Higher, Weigh on Ethanol - WSJ
- From: mg <mgkelson@xxxxxxxxx>
- Date: Tue, 17 Jun 2008 13:56:38 -0700 (PDT)
On Jun 14, 1:51 pm, Rumpelstiltskin
<PleaseDoNotReplyByEm...@xxxxxxxxxxx> wrote:
On Sat, 14 Jun 2008 09:46:21 -0700 (PDT), mg <mgkel...@xxxxxxxxx>
wrote:
On Jun 14, 8:17 am, jim <jim10...@xxxxxxxxx> wrote:
Midwest Floods Push Grain Prices Higher, Weigh on Ethanol
By LAUREN ETTER
June 14, 2008; Page A3
The effects of flooding in the Midwest are rippling across and beyond
the Great Plains, striking at the ethanol industry, hog farmers, pork
producers and even catfish farms as grain prices continue to soar.
Torrential rains cause flooding in the Midwest, driving 10,000 to
evacuate their homes and threatening the crops of this key
agricultural region. Video courtesy of Reuters (June 13)
Cities in Iowa, Wisconsin, Illinois and Missouri sandbagged levees to
keep them from bursting and urged residents to seek higher ground.
River levels in some places have surpassed records set during a flood
in 1993, considered the worst in recent history.
The entire state of Iowa is experiencing flood conditions, according
to the Army Corps of Engineers. In Cedar Rapids, population 124,000, a
railroad bridge collapsed, 3,000 homes were evacuated and a downtown
hospital had to be evacuated. Experts say Iowa's Cedar River could
crest above 30 feet -- more than 10 feet higher than its crest of
19.27 feet in 1993. Heavy rains are expected to continue across the
Midwest at least through Monday, though drier, sunnier weather is
forecast next week.
The flooding threatens to wipe out farms' crops of corn or soybeans,
and this has pushed prices to record levels. On the Chicago Board of
Trade Friday, corn prices hit a new record high of $7.3175 a bushel,
while soybeans traded near record highs, closing at $15.60. Corn
prices have climbed about 10% in the past week, threatening to put
further upward pressure on food prices that have been climbing for a
year.
Bill Lapp, an economist at consulting firm Advanced Economic
Solutions, Omaha, Neb., and former chief economist at ConAgra Foods
Inc., said higher grain prices brought on by poor weather will help
push food prices up by 9% a year through 2012, including this year.
Last year, food prices rose by 4%, and the Department of Agriculture
estimates they will rise by as much as 5.5% this year.
[See more]
Getty Images
Cedar Rapids fire department personnel rescued residents from flooded
areas of the city Thursday.
Higher corn costs are cutting into profit margins of corn-fueled
ethanol producers nationwide. At VeraSun Energy Corp., of Brookings,
S.D., one of the nation's biggest ethanol producers, shares have
fallen by about 14% in the past week and were at $4.81 in 4 p.m. New
York Stock Exchange composite trading Friday. Shares of Denver-based
BioFuel Energy Corp. are down more than 30% in the past week and were
at $3.12 in 4 p.m. trading on the Nasdaq Stock Market.
At least five small to midsize ethanol plants have shut down recently,
according to David Driscoll at Citigroup, who declined to disclose the
names of the plants. He warned that these closures are the "tip of the
iceberg."
The Iowa Renewable Fuels Association said Friday the flood has caused
300 million gallons of ethanol production, on an annual basis, to be
forced off line and that could quickly grow to 400 million gallons.
[Go to graphic]
The higher corn prices are also hurting big grain processors like
Archer-Daniels-Midland Co., of Decatur, Ill., which turns the grain
into products from corn syrup to ethanol. BMO Capital Markets
downgraded ADM's stock to "market perform" Thursday. The shares lost
12% over the past week and were trading at $32.61 Friday. Employees
were deployed "where needed" to fill sandbags, and one of its
corn-processing facilities at Cedar Rapids isn't operational,
according to a company spokesman. Also, ADM says that throughout its
Midwest operations it is "experiencing constrained logistics because
of the closure of railways, roadways and the Upper Mississippi River."
[The Food Crisis] THE FOOD CRISIS
Expectations for tighter ethanol supplies because of higher corn
prices could increase demand for gasoline, in turn helping to force up
gas prices. The squeeze on ethanol also could heighten calls for the
federal government to suspend its requirement that nine billion
gallons of biofuels be blended into gasoline by the end of this year.
In the South, some catfish farmers who rely on corn to feed their fish
are plowing over their ponds.
Hog producers are being hit, too, as they pay higher prices for grains
to feed their pigs.
Thursday, credit-rating firm Moody's Investor Service said it had put
Smithfield Foods Inc. under review for a potential downgrade to its
credit rating. The meat company recently reported a 94% drop in
fiscal-fourth-quarter earnings. Chief Executive Larry Pope said last
week that higher feed costs are partly the result of increased ethanol
use.
As the old saying goes, "when it rains it pours". It makes you wonder
how high prices can go. I wonder what Social Securities cost of living
adjustment will be this year?
Not much. Food and energy apparently don't contribute as
much to the official cost of living index as one might think.
If you're Bill Gates, then the cost of a Hawaiian Island
would be important, and if the price of that hasn't increased
much, it would greatly offset most of the relatively piddling
amount he spends on food and energy. Now that Real
Estate is losing value at breakneck speed, the official cost
of living might actually go down, I suppose! It seems not
to be as reflective of the actual cost of day-to-day life for
us peasants as one might have thought.
I doubt if the raise I got last year on Social Security would do much
more than cover the amount my dog's chicken-strip, treats have gone
up.
Some pictures. Just when you thought things couldn't get worse . . .
http://img229.imageshack.us/img229/898/mousevw9.jpg
http://images.google.com/images?client=firefox-a&rls=org.mozilla%3Aen...
.
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