Yes, a long and impossible title!
This slide deck and podcast is one more attempt to paint the "big picture" facing US corn and soybeans. The first issue we must all understand is not the "SHORTAGE of Grain & Oilseed Supply," the issue is the "SURPLUS of Grain & Oilseed Supply."
The second issue on the demand side is not "Food VERSUS Fuel," the issue is "Food AND Fuel."
As clients well know, I have made innumerable attempts to explain myself on these issues, with little apparent success--certainly not among US farmers themselves.
An article in the New York Times, ahead of the Iowa Presidential Caucus, quoted a corn farmer in northeast Iowa, "When I look out my window and see farms that have been built and expanded and improved, it's because of the ethanol mandate."
I would say yes and no. I would ask whether this corn farmer could not also see soybeans out his window? I would ask him to consider the JOINT role of corn and soybeans in the recent Iowa prosperity and the fact that China's imports of soybeans from the Americas grew to over 70 mmt during the same time period as the ethanol RFS--absorbing some 60 million acres of top-quality cropland, enough otherwise to produce almost 10 billion bushels of corn. To me, without China's need for this much protein for their domestic pork consumption, and for the food oil to cook it (in woks), we would not have seen the cornbelt's $140 billion "wealth build" in the 2007-2013 period.
In other words, I would claim along with experts at The World Bank that the Global Commodity Price Super-Cycle, 2007-13, now concluded (!), was not due singly to the RFS, but just as much to the overall entry of China to the world economy. It was China, with its unprecedented demand for crude oil and ALL other commodities at once, that really drove the bus!
Let me emphasize something immediately: I am NOT against the RFS. The regulations were in large measure responsible for the funding of a 15-billion-gallon value-added industry in this country, an invaluable commercial asset that our world grain exporting competitors do not have. Furthermore, I fully understand that the role of the RFS today is to keep this industry afloat, through RIN values, with oil and gasoline prices having collapsed lower than anyone would ever have expected, including our own Department of Energy.
I furthermore do not agree with other one-liners in the same New York Times article, like "The ethanol mandate has driven up food costs while failing to deliver its promised environmental benefits." Pages 8 and 9 of my present deck show that the US and world price of corn has fallen by 50% in the past two years, even as the volume of corn used for ethanol has continued to rise. I think in addition that the environmental benefits of a bouyant cornbelt economy are vastly more than academic "carbon accounting" now indicates.
Another one-liner in the article says, "Mandates for food-based biofuels like corn increase hunger." Pages 11, 12, and 13 in my deck show findings by the United Nations, announced in May of 2015 that say, "World's Hungry Falls by Fifth in 25 Years." Even though the world's population increased by over 2 billion people in 25 years, there are now 25% less hungry in that total than 25 years ago. (The trick has simply been more trade.)
This last assertion about less hunger, together with the fact that American grain and oilseed agriculture is in a condition of SURPLUS, is probably more difficult for our public to understand than anything else I know of. The public simply does not grasp the facts of world geography and the distribution of grain and oilseed production. The United States and Canada, together with the other two big Grain Export Hubs of South America and the Black Sea, have only 11% of the world's population--but 39% of the world's grain and oilseed production capacity. We cannot eat this vast amount of food ourselves! (See pages 15-17 of the deck.) And the 39% part is getting larger and larger, the more the Export Hubs increase grain yields. (Pages 18 and 19.)
For the good of the all, the inherent job of the Export Hubs is to export food to the 89% of the world's population that needs it. The hang-up, of course, is money. Many people in the 89% don't have the money to pay for our grain and oilseed exports. However, as we've seen with China's economic growth, this can change. China now accounts for over 40% of world trade in corn and soybeans, calculated on the basis of the farmland devoted to growing those commodities. (Page 23.)
First Big Question for Commercial Forecasting Today. How fast is "world paying meat demand" growing? Fast enough to outpace the growth in US corn and soybeans yields, which otherwise creates greater surpluses? (Answer is "No," on page 21.)
Second Big Question for Commercial Forecasting Today. Will the "fuel use" of American corn and soybeans make up for the weakness of world paying demand for meat? (Answer is tricky, see pages 24 to 35, with many new charts. Clue: If the CAFE MoGas efficiency standards adopted in 2012 are upheld in the 2017 "re-set," and if the auto industry is willing and able to meet these with mid-level ethanol blends (E25) in high-compression engines, then perhaps yes. If not, then probably no. Our present guess is on page 36, with implications for reduced corn-soybean income and downward pressure on input prices on page 37.)
Third Big Question for Commercial Forecasting Today. What happens to ethanol policy after the 2016 election? (No answer in the deck!)
I'll give my own guess on politics at our seminar on March 21, and I'll try to get a couple of other speakers to do so as well.
Bill
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Bill Hudson
The ProExporter Network
PS: Early registration applies through March 4. Agenda here. 
