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The Forum > General Discussion > Beattie promises ethanol

Beattie promises ethanol

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Graham, I printed out and digested Lester's article. IMHO the
issue is so complex, only the market will sort it out.

Yes, wheat and sugar prices have risen, but from incredibly low
levels. Much grain is only produced in many parts of the world,
with massive Govt subsidies, for political rather then economic
reasons.

I think the key is to see ethanol not as a cure all, but as
just another of many potential energy sources for the future.

Personally I don't believe that the solution to feeding the
third world, is to keep commodity prices below their cost
of production, by Govt subsidies.

If we look at the poorest areas, ie. the Horn of Africa,
last week's Economist has a detailed article discussing
lack of family planning, the world's highest birthrates
and overpopulation as problems leading to mass starvation
in that area. Shipping ever increasing boatloads of food into
that area, is not going to solve their problems either, in the
longer term.

Personally I think that their answers lie in modern family
planning availability, ie. its easier to feed 2-3 kids rather
then 10. Secondly, Western agricultural methods might be great
for the West, but things like permaculture would be far better
suited to the third world to increase food production there,
rather then chemical farming, as we do it.

Meantime, if corn is only worth 60$ US to a grower in Iowa or
wheat is only worth 150$ to a farmer in West Australia,
if you crunch the numbers, that tonne of wheat can produce
400l of ethanol. If it makes economic sense, why not do it?
Posted by Yabby, Sunday, 20 August 2006 3:09:21 PM
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Yabby, if it was left to the market that would be one thing, but it isn't being left to the market. If it was left to the market no-one would be buying ethanol.

At current rates of fuel it is still not economical as a fuel additive, particularly as it doesn't pay excise. As food is in even shorter supply than things you can turn into petrol, like coal and shale oil and natural gas, ethanol is likely to scream up in price as a result of any significant substitution to a point where it will be even less commercial than it is now. So long-term, it probably isn't a threat to food availability.

But short term, it is. Particularly to those who buy their food as grain, rather than processed, like we do in the west.
Posted by GrahamY, Wednesday, 23 August 2006 4:35:56 PM
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Graham, sorry for my seemginly wishy washy response :) but
I don't think its as clear cut as you suggest.

We don't know for sure what consumer reaction will be,
as without ethanol being freely available, its hard to
know exactly. What we do know is that more and more
people are so called green concious. If you look at the
Toyota Prius, its expensive and surveys show that the
majority of people who buy one, buy it to make an
environmental impact statement. Now they have a huge
waiting list and can't keep up with demand.

Alot of people I have spoken to, are keen to use biofuels
for similar reasons. Many are also aware of what is going
on in the Middle East. They know that Iran knows, that
if they were to close the Straits of Hormuz tomorrow,
the West would be basically stuffed. They are highly
uncomfortable with depending on the Middle East for
their wellbeing, so would be happy to use alternate
sources of energy.

Already the first farmers in WA have started making their
own biodiesel from their own crops, all on farm. Cost
is only one consideration in their reasoning.

All the figures that I have seen from the US and locally,
suggest that around 50$ per barrel is the cutoff point.
If oil stays above that, its worth doing, if oil falls
below that, they will lose money.
Thats allowing for tax etc.

In terms of say wheat or barley, just about all the grain
that we sell from Australia, is processed further. It goes
to flour mills in Indonesia, Egypt, Japan, Iraq, etc. etc.
The stuff you see on TV in bags, going to the third world,
is usually donated grain as food aid, mostly with a big
American flag on it.
Posted by Yabby, Wednesday, 23 August 2006 8:29:03 PM
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Yabby,

I'm doing some research in this area and if you could provide a source and/or rationale for your comment "a loaf of bread contains about 10c worth of wheat" I would be interested to read it.
Posted by corymelus, Monday, 28 August 2006 4:29:47 PM
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Cory, these days they make some larger loaves, but the old standard
loaf of bread contains about 500g of flour. The yield of wheat
to flour is around the 77-80% mark. Last years ASW price for wheat
to farmers gross, was 185$ a tonne, or 18.5c a kg gross. After
transport, handling, financing etc, they were left with about 150$ a tonne.

You can crunch the numbers yourself from that. You will land up with
about 10c a loaf that the farmer is paid, the rest goes to others.

No wonder farmers are hoping that ethanol from wheat has potential,
as at 150$ a tonne, they are fast going broke producing wheat.

A tonne of wheat can make around 400l of ethanol. American farmers
who have switched to ethanol production, are laughing all the way
to the bank, and actually finally earning a living in the process
for a change.
Posted by Yabby, Monday, 28 August 2006 7:52:48 PM
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Yabby, you're just trying to over-complicate the issue and obscure it. If ethanol were to fill a significant amount of our petrol needs, the price of grain and sugar would skyrocket, making the cost of food higher, and also pretty quickly making ethanol uncompetitive as a fuel additive.

At the margin higher food costs would cause more people to starve.

The market won't correct the problem if governments mandate a certain percentage of fuel to be ethanol. In fact it will end up making fuel more expensive as the price of ethanol rises, yet refiners are still obliged to incorporate it.

It won't reduce our dependence on overseas oil, except at the margin, and given the growth in China and India, the pressure on oil will catch-up in a matter of months and we'll be just as vulnerable, unless you want all of our fuel to be generated from ethanol, in which case we won't be able to grow enough sugar and grain.

If there was a case for ethanol, the government wouldn't need to mandate it and subsidise it - the oil companies would be falling over themselves to supply it. That's what they're doing with LPG, although again with government aid.
Posted by GrahamY, Monday, 28 August 2006 9:48:52 PM
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