The price of corn has increased by 70% since last summer. I don’t want to boast, but that is exactly what I had predicted in the spring of ‘06. But there’s more: in the course of a normal conversation around the water cooler, I happened to mention my calculation to the CEO of Profid’Or who then shared this information with his board members who then repeated this to their veterinaries and truck drivers who quickly spread the news to Lord only knows! So if the market for corn had remained around $100 a ton, I would have been tarred and feathered. This will teach me to play with crystal balls…

Allow me to continue. The price of corn has increased by 70% since last summer. And it’s all because of Bush. For reasons of national security, he wants to reduce his country’s dependence on imported oil. And because Americans never do anything half-assed, there’s lots of money involved: a 51¢ per gallon subsidy, import taxes, tax credits, a duty to include ethanol in gas, etc.

The U.S. President wants 60 billion gallons of ethanol over the next 30 years. According to some people this is an implausible goal, people such as large pork and poultry producers – Smithfield, Tyson, Pilgrim’s Pride – who see their margins evaporating before their very eyes, such as environmentalists who believe that the soil and hydric soil systems cannot support this kind of development and transport specialists who declare that infrastructures that were initially designed to ship grain by rail and barge will be entirely inadequate to feed the huge ethanol plants parked in middle America.

With the current 107 plants in operation and the 50 new plants planned for construction over the next five years, not even taking into account the scheduled expansion of 10 more, over 35% of all corn production will be used. This is considerable. The result will be a higher yield per hectare, fewer acreage for cotton and soy, less for animal consumption and a significant decrease in exports.

In short, this increased demand for ethanol-based gas will profoundly affect the U.S. grain industry. There’s already an upset in the balance. Corn inventories are as low as those recorded back in 1973, which says a lot! The smallest disruption – drought, cultivated area, increased demand, hurricane – may result in skyrocketing prices to heights still unseen. You don’t believe me? Just you wait and see when the U.S. Department of Agriculture issues its next report.

As for us, this upturn will help our corn and grain producers. I predict a period of great exaltation over the next few months. The now happy producer will start sowing seeds all over the place, even along ditches, he will purchase that longed-for tractor, covet his neighbour’s land and in some extreme cases – because of his cheerful disposition – will pleasantly greet environmental civil servants.

I don’t want to be a party pooper but more often than not this euphoric phase doesn’t last too long. There will come a day when our happy-go-lucky
producer will wake up disheartened and pissed off! Corn at $115, holy crap, and he’ll be saying to himself: this is just crazy!

Don’t be discouraged. At this point in time, thanks to very low inventory levels and President Bush’s obsession with being energy sufficient, two or three crops will be needed to re-establish a balance before prices start to drop.

Go ahead! Strike while it’s still time...