It’s all to do with the Government being able to tell the public that they’re weaning them off oil produced by those nasty terrorists. It’s a fallacy... and the biggest food producer in the world is choosing to burn its crops for the sake of subsidies...
Which is bad news for the American people... but great news for our food investments... here’s why...
We should not burn food - it’s that simple...
Whilst Europe has come to the realisation that ethanol is a big fat waste of time... the US are pressing on regardless.
The Department of Energy confirmed this last night... and it’s all down to "Homeland Security".
The US government has revealed that ethanol usage and energy efficiency had cut the country’s total share of its oil imports for the first time since 1977. (Note that’s not total imports by volume, it is the proportion of oil used that is imported).
It also said that the US’s foreign oil dependency was expected to fall from 60% today to 50% in 2015, before rising again slightly to 54% in 2030.
US oil imports made up 57.9% of demand in the first quarter, compared with 58.2% in the equivalent period last year. The Department of Energy said:
"The 1970s is the last time we saw any significant decline in net import dependency in the US. It shows that markets do work, policy changes do work, technology does work." Energy security is a big theme in the US - and I reckon that this data will make it much more difficult to reduce biofuels subsidies. In fact, it is now easier to argue in the US that those seeking a cut in ethanol subsidies are acting in an unpatriotic manner.
This is bad news for food prices... but good for our investment in food.
Food price will stay high...
Whilst not specifically mentioning biofuels, the World Bank warned today that prices of food will stay high in the next two to three years.
"This is not a short-term phenomenon. We need to work on a new deal for food policy in order to address the short-term need while keeping in mind that it is going to take longer to alleviate the situation," according to World Bank managing director Juan Jose Daboub.
The US remains in denial about its biofuels policy. Agriculture Secretary Ed Schafer said yesterday that the increased use of biofuels may have some small, short-term costs, but those do not outweigh the ultimate benefits of reducing the country's dependence on oil.
The problem with this is that poorer people pay a higher proportion of their income on food and are therefore hurt more by rising food costs. These "small, short-term costs" mentioned by Schafer are significant and long-term in other parts of the world.
Subsidy is supposed to be a short-term solution to a problem. Its aim is to prevent any jarring of the economy. However, it’s going to take the US a very long-time to wean itself off imported oil - and the cost will be paid in rising food prices.
That’s why we’re in on an agricultural play that will take full advantage of this situation. This short term solution won’t be changing any time soon (now there’s an oxymoron for you) - and now is the perfect time to get in on this wave. Discover what this stock is right now...
Regards,
Garry White
Editor
Smart Commodities UK
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