Ethanol's Ripple Effect

The US government has been subsidizing the research, development
and use of ethanol.  This is being done in an effort to provide an
alternative solution to importing costly oil and gas for use here
in the United States. 

Some day, ethanol might be a great alternative.  However, it is
having a "ripple effect" in the economy.  This is from the Daily
Herald, a paper in suburban Chicago, on March 11, 2007:

     The Department of Agriculture said recently that strong
     demand for corn from ethanol plants is driving up the
     cost of livestock and will raise prices for beef, pork
     and chicken.  Meat and poultry production will fall as
     producers face higher feed costs, the department said in
     its monthly crop report.

     Ethanol fuel, which is blended with gasoline, is consuming
     20% of last year's corn crop, and is expected to gobble
     up more than 25% of this year's crop.

     The price of corn, the main feed for livestock, has driven
     the cost of feeding chickens, up 40%, according to the
     National Chicken Council.  The council says that chicken,
     the most popular meat with consumers, will soon cost more
     at the grocery store.  The industry worries the competition
     from ethanol could cause a shortage of corn.

     The average price of corn, unchanged from last month, is
     $3.20 per bushel, up from $2 per bushel last year.

That is a 60% increase in the price of corn in one year. 
This is Economics 101.  There is far too much demand for corn.

P.S. You would think that the corn charts would be skyrocketing.
But they have already made a significant move.  However there
are other areas where this news can possibly put money in your pocket.

P.P.S  There have been more reports over the past few days that
the "plantings" for corn are up tremendously, compared to last year. 
Sounds nice, but it's not what you plant, it's what you grow
(and ultimately harvest) that really matters.  A few dry weeks
(no rain) in late June-early July could do a LOT of damage.  

Tom

Thomas Mullooly
Mullooly Asset Management LLC
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