Impact of the drought is multivariable

First, the good news: the "margin squeeze" due to rising corn prices/futures is killing corn ethanol - still the stupidest idea on the planet (outside of Washington-subsidized Iowa).

Then the worse news: Russia/Black Sea region is undergoing another bad drought, raising the specter of another export ban. US is biggest exporter of wheat but the Black Sea trio (Russia, Kazakhstan and Ukraine) account for one-quarter of global exports and are traditionally key suppliers to north Africa and the Middle East.

Comments

[Steven J.]

Tom
As one who has had nothing but admiration for your work, am somewhat dumbfounded by the knock on grain based ethanol. The blenders credit subsidy expired in 2011 and the tariffs left with the subsidy, meaning that the government no longer subsidizes nor protects U.S. corn ethanol production. 1/3rd of the corn produced in U.S. is used for livestock feed, 1/3rd is used for ethanol and the remaining 1/3rd is split 50-50 between human consumption and exports. The amount of corn produced for ethanol usage came from acreage previously idled via government subsidized CRP acres while 50% of the original CRP acres continue to remain out of production.

Grain based ethanol was always supose to be "transitional" till the next best technology comes along to replace it. In the mean time, this demand (in conjunction w/ other globalization forces) have transformed the rural landscape in America in a Nixon goes to China / Bush goes to Iowa kind of way.

Respectfully, Brazil does not get a bad wrap (actually quite the opposite) for their sugar based ethanol production.