So let's review. Iowa grows corn. A decade ago, too much corn. Surplus makes corn too cheap. Farmers poor. Iowa senators and congressmen in Washington lobby for corn-ethanol policy. Energy independence. Green renewables. Kick-start subsidies. Mandatory 10% ethanol to gasoline blend edict. A brand new age!
2010: Ethanol gobbles up 40% of US corn production. Corn price boom. Production expands dramatically. Sensitive CRP set-aside land converted back to corn production. Other grain prices rise - economic law due to competition for land use and arbitrage. Meat prices rise due to feed grain scarcity. Food riots around the world.
Iowa Corn Harvest 2013: Corn grain typically needs artificial direct-fired drying, using clean-burning propane or natural gas.
Iowa Winter 2014: Now we got da ethanol for da SUV, but no propane for da house. It's a crazy old world, ain't it?
Ontario Winter 2014: Farmers start whining about low corn prices. Wynnebag makes noises about the necessity of fixing a minimum guaranteed corn price.
ReplyDeleteOntario Spring 2014: Farmers plant the same amount of corn as Wynnebag promises to introduce legislation to ensure farmers get a "fair" price.
Ontario Summer 2014: Vaseline sales soar as tax-payers brace themselves.
Ha Ha! I stockpiled Vaseline while it was still cheap!
DeleteI've been following the web published news stories out of the Midwest since early January when propane supply/price stared coming apart at the seams.
ReplyDeleteAmerican rural people are p*ssed! at getting left stranded at -30 and -40 without heating propane fuel...to the point many propane employees are now wearing bullet proof vests.
There has been a happy marriage between propane and rural/agriculture for as long as I can remember....but like any relationship that goes sour now the big push back is on and those people still with financial means are bolting for the door ...meaning they WILL have an alternate heating system be it wood or grain stove/furnace for next winter.
Various US states have "energy assistance programs" for low income people to pay utility bills...varies from 500-1000 depending on which state...they upped the rate another 1000$....and since then in the Upper Midwest propane has been stalled at 7$ a gallon take it at that price or freeze.
Some people also booked and paid for a whole years worth of propane before this whole sh*tstorm started...an exit clause in the contracts lets suppliers off the hook if the price increases a certain % ...so people thought they were safe with their winter fuel bought and paid for and ended up not getting any delivered....none to be had suppliers claimed.
As far as I can see propane lit the match that blew itself up. BOOM.
I just heard from a good source, that there will be no propane available in Ontario and Quebec in March. None. Zero.
DeleteYou may be right yellojourno....time will tell.
DeleteOne big angle so far ignored is the part the Bank of Japan is playing in this. They have a fiat money printing spree on that would make Ben Bernanke pale.
Fucushima happened and with that a total shut down of the Japan nuclear power plants.
Since then they are building and gobbling up 30%+ of the global LNG supplies to fuel gas power plants....a new one to commence operation in April and 3 more after that in 2014.
I read the Japanese are paying 12$ a gallon...paid for with phony-fiat money printed outa thin air.
Capitalism is what it is so LNG supplies (of which propane is part) are moving to that market instead.
Add to the mix also is Europe about to start "fracking" and the demand that creates for LNG in the fracking process....more demand outa the North America supply.
And the final icing on the cake for the Midwest will be the reversal of the Kinder Morgan Cochin pipeline.It brought propane from Fort Saskatchewan, north of Edmonton, through the Midwest to Sarnia...July 2013 (maybe?) that pipeline is to be reversed and carry propane west instead of east. The big plan was to move propane by rail into the Midwest to make up for the pipeline supply no longer being available....but Warren Buffet's death trains have the tracks all full and they can barely move grain outa the west never mind add propane to the rail lines.
This isn't gonna end well.
Some US farmers have rigged their own wood-fired dryers. I'm going to bet that this will become more and more popular - at least until the EPA steps in. http://www.uppermichiganssource.com/news/story.aspx?id=1003043#.UvJ9lMuYbIU
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