Tuesday, July 17, 2007

Corn, Ethanol, Markets, and Diversity


I’ve recently commented on the above article from the CS monitor. It also contained an additional statement that I take issue with, at least theoretically.

"Any sort of shock to corn yields, such as drought, unseasonably hot weather, pests, or disease could send food prices into the stratosphere. Such concerns are more than theoretical. In 1970, an outbreak of a fungus destroyed 15 percent of the US corn crop.”

I think they want to make the point of how tight supply and demand conditions are and how easily we could see price spikes to ration shortages in case of a drought or some other disaster. (as a result of corn diverted to ethanol production)

But the point is that the corn blight of the 70's was the result of common male sterile inbreds being used to produce most of the hybrids grown then. This common genetic background made almost the entire corn crop susceptible. Most companies have learned their lesson and genetic diversity among corn hybrids has proliferated to meet diverse grower needs since then anyway. Between diversification in crops planted and the risk management tools available in the market, disasters like the corn blight in the 70’s are really much more theoretical than the CS Monitor implies.

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