My View From The Country

Can You Plan Around The Oil/Ethanol Bubbles?

Everyone realizes the recent surge in oil prices has been largely speculation-based, and ethanol even more so. What could be more speculative than a product that can't compete without huge government subsidies, and actually delivers little in terms of what it promises -- environmental benefits and reducing America's dependence on foreign oil?

It becomes even more difficult to assess because oil/energy prices are likely to remain hugely volatile; experts can make a very good case for an oil spiral either up or down.

Renewable fuels will play a huge role in the future. Yet, we have executives from the nation's largest ethanol seller saying the only certainty is that ethanol isn't the answer, and they're investing millions in what they call the second generation of renewable energy. At the same time, ethanol has created the largest financial windfall for corn growers in history, with hundreds of plants under construction, and ever-increasing production mandates coming out of the government.

In the short term, planning is simple. Fuel/energy prices will be high and likely to remain very volatile. Ethanol will keep corn prices artificially high, and having access to the byproducts will be essential to helping mitigate part of the losses that the beef industry will incur as a result of the current political environment.

However, it becomes trickier from a longer-term perspective. If the experts and scientists are correct, how long will the false ethanol environment last -- five years, 10 years, 20 years? Perhaps there's no good answer at this time.

It means counting on higher energy costs, and higher grain costs in the short term, and it means preparing for the countless related effects that this will trigger. But it also means that whatever strategies are adopted to take advantage of the new opportunities, or to overcome new challenges, can't be seen as fundamental structural changes. Instead, it means that, as producers, this is an area that will have to remain top of mind in every planning session moving forward. Be ready to adjust to new environments.

What's My View From The Country?

As a fulltime rancher, opinion contribur Troy Marshall brings a unique perspective on how consumer and political trends affect livestock production.

Contributors

Troy Marshall

Troy Marshall is a multi-generational rancher who grew up in Wheatland, WY, and obtained an Equine Science/Animal Science degree from Colorado State University where he competed on both the livestock...

Sponsored Introduction Continue on to (or wait seconds) ×