A plea for market convergence

The Commodity Futures Trading Commission’s Agricultural Advisory Committee was told yesterday that it needs to quickly address the lack of convergence between ag commodity futures and cash prices.

According to this Dow Jones story, two potential solutions discussed by panel members included a proposal to significantly increase premium charges for grain storage and a proposal for a quicker "compelled load-out," which would allow a warehouse certificate holder to force an elevator to deliver physical commodities in as little as 48 hours.

Advance Trading’s Terry Reinhart told the panel that doubling premium charges would assure convergence. CME’s Dave Lehman said a rate increase for storage is being tried under advisement by the National Grain and Feed Association, but so far the results have been disappointing.

He said CME will also try implementing new seasonal storage rates and setting up additional delivery locations.

Brownfield’s Peter Shinn, in this report, noted that with the sharp run-up in ag commodity prices this year, convergence didn't happen for wheat and cotton some months. And that made the hedges of commercial market players worthless.

This reminds me of a Congressional hearing in June where the discussion centered on CFTC and oil markets. One person who testified said futures markets were turning into "gambling casinos". Check out that post.

CornsTALK: Charging ahead with the truth

The headline on the 2008 summer edition of the Nebraska Corn Board's CornsTALK publication says it all: Charging ahead with the truth on food and fuel.

Veritas -- the word below the corn kernel in the farmer's flag -- means truth in Latin. And in this issue of CornsTALK, that's exactly what is discussed -- efforts by the Nebraska Corn Board, National Corn Growers Association and others to spread the truth on the food and fuel issue.

In addition to discussing the anti-ethanol campaign led by the Grocery Gang, a number of facts are presented, including a few Kernels of Truth.

To download a .pdf of the quarterly newsletter, click here.

USDA says 'no' to penalty-free CRP opt-outs

Secretary of Agriculture Ed Schafer announced today that USDA will not allow penalty-free opt-outs this year for acres currently enrolled in the Conservation Reserve Program (CRP).

"We believe the decision that we are announcing today strikes best balance between supporting programs to protect natural resources and meeting the demands for grain production," Schafer said.

Schafer said record-high corn prices have retreated 25%, while soybean prices dropped 14%. He added that this year's floods may have had less of an impact than originally believed, and crop conditions continue to improve, with the latest conditions above the five-year average.

Even without penalty-free opt-outs, Schafer said the 2008 farm bill will lead to a smaller CRP. The farm bill lowers the cap on CRP acres, he said, from 39.2 to 32.0 million. That means the 34.7 million acres enrolled now will shrink. In September this year, 1.1 million acres expire, followed by 3.8 million in 2009 and 4.4 million in 2010. Of course some of those acres will be re-enrolled, but others will likely enter into production.

Crop report: Corn looking even better

Here's a link to this week's crop progress report.

The highlights:

76 percent of Nebraska's crop is in good to excellent condition, up a point from last week; 18 percent is in fair condition and 6 percent is poor to very poor.

Nationally, 66 percent of the crop is in good to excellent condition, up a point from last week; 24 percent is fair and 10 is poor to very poor. Last year, 58 percent was good to excellent, 26 was fair and 16 percent poor to very poor. So...the crop that's in the ground is in good shape.

The overall crop is still behind, though, as the percent of crop silking and in dough stage lags the five-year average.

Oil: A clear and present danger

An opinion article appeared on the Wall Street Journal webpage today - it is authored by Robert McFarlane, who served as President Ronald Reagan's national security adviser, and George Philippidis, who is energy director at Florida International University in Miami.

In the article -- view it here -- the authors say the escalation in oil and food prices is a "clear and present danger to our economy and national security" and that the root cause of the crisis is "our dependence on a single commodity, oil, for transportation -- we burn 145 billion gallons of gasoline a year."

Here's a good comment:

The public has been bombarded with lies and half-truths about biofuels, especially in the last six months. Americans should realize that biofuels are superior to fossil fuels. Biofuels are renewable, nontoxic and biodegradable. They are also beneficial to the automobile engine, the environment and the economy.

And another:

Energy security can not be achieved with a silver bullet. It is not a competition between corn ethanol and sugarcane ethanol or between biofuels and plug-in hybrids. The sooner we realize that U.S. energy security needs all of the above, the sooner our country will be able to commit to a coherent long-term energy policy.

Besides pushing for more flex-fuel vehicles, McFarlane and Philippidis argue that biofuels from Latin America should become an integral part of U.S. energy strategy. Although corn growers and U.S. ethanol producers may not agree with some of their ideas along those lines, their take on the importance of ethanol to diversifying our fuel supplies is spot on.

Senators get meeting with EPA

A group of Senators, including Sen. Ben Nelson (D-Neb.), met with Environmental Protection Agency administrator late last week -- following up on a letter they sent him expressing their frustration that Johnson had met privately with Texas Gov. Rick Perry. The Texas governor is behind the Renewable Fuels Standard (RFS) waiver request.

Sen. Chuck Grassley (R-Iowa) told DTN's Chris Claytin that Johnson "made clear to us he did not have any agreement with Perry to delay the decision." (The decision was delayed until sometime in August.)

Grassley said also said: "We talked a little bit about the burden the Perry petition had to overcome and I don't think he disagreed with that."

For the full DTN story, click here.

News: cheap gas, cheaper bread, WDGS and more

Instead of four different blog posts today - here's one linking to some good articles:

From The Hill - Gas cheaper because of ethanol
Ethanol is keeping gas prices as much as 40 cents cheaper, according to Sen. Tom Harkin (D-Iowa), one of the Senate’s top supporters of corn-based renewable fuels.

From InsideAg - Give us our cheaper bread
In his blog, Successful Farming's John Walter discusses lower corn (and oil) prices. And asks: Where is the point where prices break for a loaf of bread or a tank of gas? Be sure to check out the corn future chart he pasted in.

From Nebraska Farmer - Research Geared to Easy Storage of WDGS
The goal is to expand storage options and perfect feeding with low quality forages, which will twice as many cattle to be in the same pasture without damaging range health. (For more on WDGS, click here.)

From Kansas City InfoZine - Ethanol: Good News for Kansas
Kansas Lieutenant Governor Mark Parkinson writes that Ethanol is here to stay and this is good news for all of us.

From USA Today - Best ideas are ideology-free
Conservative columnist Cal Thomas and liberal Democratic strategist Bob Beckel agree with T. Boone Pickens: We need to do something about foreign oil.

From USA Today - Ethanol offsets oil prices
Bob Dinneen reminds us that without biofuels, we’d be paying even more for gasoline.

More ethanol education needed

Have you seen a “No Corn in Our Gas” sign lately? Or one asking, “Why Do You Put Alcohol in Your Tank?” Or maybe a gas station promoting “100% Gas”?

Although more common in the late 1970s or early '80s when oil companies funded campaigns against gasohol - their very tiny competition at the time - such signs can also be found in Oklahoma City today, where several gas stations have bought into the same half-truths that were common 30 years ago. All because a labeling law recently came into force in the state. Before that people didn't know the difference.

Here's an article in the New York Times talking about the 'controversy.' Although the Times quotes many consumers who've been fed (and believe) the mistruths, not all is negative. This article talks about consumer choices - and how the station owner believes in renewables. This article says Oklahoma had the cheapest gas in the country this week (shouldn't they thank ethanol for this?).

This reminded me of a good blog post by the Clean Fuels Development Coalition that explained the 11 campaigns in history against ethanol. To read about the history of the anti-ethanol campaigns, click here. If people would read this, they'd understand why corn and ethanol producers work so hard to tell the positive story of ethanol.

CRP grazing can move forward

The Seattle district court judge that put a halt to haying and grazing on Conservation Reserve Program (CRP) acres has decided to let it happen -- but there are several limits that may keep some from taking advantage of the program. (He made the ruling since the National Wildlife Fund and USDA failed to reach an agreement earlier in the week.)

Producers with already approved CRP haying/grazing contracts can continue operations through the program's original Nov. 10 deadline. Farmers and ranchers who sent applications but have not received approvals can have their applications processed and, if approved, can hay until Sept. 30 or graze until Oct. 15.

Those who have not yet sent applications can - as long as they submit in their application a statement explaining that they need the program, and whether the producer made investments or preparations of $4,500 or more to participate. Documentation is needed. If approved, those producers also will be able to hay until Sept. 30 or graze until Oct. 1.

The judge said USDA did violate the National Environmental Policy Act and was wrong to decide, on the basis of an environmental evaluation, that the Critical Feed Use initiative would not have significant adverse environmental consequences. USDA decided based on that evaluation that a full environmental impact study was not necessary.

Photo: Oklahoma State University

Innovation can meet global food, feed demands

That is what the Alliance for Abundant Food and Energy believes – that through innovation, agriculture can sustainably meet the growing global demand for food and renewable forms of energy.

Founding members of the Alliance include Archer Daniels Midland, DuPont, John Deere, Monsanto and the Renewable Fuels Association.

In its news release, the Alliance said critics have tried to frame the debate as an "either/or" decision, making people feel they must choose between food and energy security. It believes this is a false choice that ignores both the capabilities of agriculture and our nation's history of using innovation to solve our problems. The Alliance realizes both are possible - and can be accomplished using less land and fewer resources than generally understood.