Several comments or questions on this topic came from DLR readers following our discussion of the proposed Goodlatte-Costa RFS
waiver bill. No one knows the answer for sure but our guess is that
it will still go into ethanol production.
Ethanol margins are still positive and will likely remain so. Ethanol plants benefit from lowerpriced corn just as livestock feeders do. But the fact that that one
billion-plus bushels of corn would still go to ethanol does not mean
the bill is Quixotic jousting with the ethanol windmills.
It is simply a
reflection of economic conditions at the present time. What if the
same crop scenario played out with $60/bbl or lower oil? Ethanol
margins would be lower the RFS might force relatively high-priced
corn into ethanol when true economics says it should not go there.
Thats the way a free market works.
Why has the economic recovery been so slow? We
hear that question frequently and read about rather constantly in
the press.
We fear that it has become a self-fulfilling prophecythe
slow recovery has caused people to behave in a way that makes for
a slow recovery. But there may be much more to it than that.
A very interesting (and concise) article in the Federal Reserve Bank of Dallass September Economic Letter makes a compelling case that the notable difference between this recession and
any other one in the US since World War II is that it was preceded
by a banking crisis.
Author Mark A. Wynne goes on to point out
that our recovery to-date is not that unusual when compared to
similar banking crisis-induced recessions in other countries.
The chart at top right illustrates his findings. It shows the
average deviations of output from pre-recessions trend paths in a
sample of countries that saw banking crises from the early 70s to
2002 as well as a 95 per cent confidence interval on those deviations.
There is some disagreement over just when the US crisis began.
If one it in 2008 (and many do), the path of US output reductions
so far fits the averages of other countries pretty well.
So, while the recovery is an anomaly relative to past US
recessions, it is in line with other countries recessions that were
preceded or begun by banking crises.
Mr Wynne points out that there is not much consensus on
why banking difficulties make for more difficult recoveries. He offers that they tend to have more lasting impacts on productivity,
employment and investment. Our idea: Perhaps banking-induced
recessions rattle consumer confidence and sentiment far more
deeply than more normal downward phases of the business cycle.
The entire report can be downloaded at http://www.dallas
fed.org/research/eclett/2011/el1109.html.
The results of the three major wire services surveys
of analysts regarding USDAs September WASDE report, due
out Tuesday, appear below.
Analysts expect a slight increase in
the corn yield but a slight decrease in the total corn crop. Ditto for
soybean yield but they expect, generally, a slightly larger soybean
crop.
They also expect 2012 corn carryout stocks of about 800 mil.
bu, up sharply from USDAs August estimate of 672 mil. bu.
Further Reading
 | - | You can view the full report by clicking here. |
