World is Green

Bill Bonner, the founder and Editor of The Daily Reckoning; gives a fascinating history of corn in America. In the Easter Monday newsletter, he talks about how Corn (go down for the article, THE FRUITED PLAIN) grew into the currency of America and the current boom due to the rise in ethanol from corn in the US.

But now, there’s a new bubble out on the plains…and a new political scam
to go with it. In Martin County, Minnesota, says Fortune Magazine, six new
ethanol plants are either in operation or being built. In the last eight
months, the price of corn has doubled, from $2 a bushel to $4.

Corn is not just a crop in the America; it is a currency. Corn is used to
feed pigs and cattle. Corn syrup is a main ingredient in Coca Cola,
candies, cakes, ice cream, hamburgers and many other products. When the
price of corn changes, every calculation changes with it. The price of
land, for example. An average acre in the mid-west produces 180 bushels.
At $2, that puts the gross yield per acre at only $360. After costs,
farmers had little left over - only about $30, according to Fortune.

But at $4 an acre, farming becomes much more profitable…with net yields
10 times higher than they were two years ago. With that kind of money
rolling over the plains, farmers grow bold. They begin to cast an eye over
the “Property for Sale” section of the newspaper…and stop in at the John
Deer dealership. In fact, Citigroup is expecting a 25% increase for John
Deere shares.

Part of the trouble with this boom is that it depends on ethanol.
Thirty-one new ethanol plants have been built in the United States since
2005. When corn was $2 a bushel, and oil was $70, they could make more
than a dollar per gallon. But at $4 a bushel, their profits have fallen to
3 cents per gallon. And if corn continues to rise, even with their
subsidies, they will be losing money.

For more on fuel and food, check out these articles.

The IPCC report (Download: PDF) on Climate Change impacts talks about the need for adaptation. The problem gets bigger because the poor in the world, even in the well developed countries, will be the worst effected.

Sub-saharan Africa has little capacity to introduce adaptation schemes, water resources are becoming increasingly scarce and dry areas are forecast to get drier. A high percentage of people are already suffering as they are poor or marginalised.

According to World Health Organisation figures, climate change already claims the lives of 150,000 people a year through natural disasters, disease and malnutrition. As temperatures rise we could see an increase in disease, malnutrition and water borne diseases.

Key findings of the report include:

75-250 million people across Africa could face water shortages by 2020

Crop yields could increase by 20% in East and Southeast Asia, but decrease by up to 30% in Central and South Asia

Agriculture fed by rainfall could drop by 50% in some African countries by 2020

20-30% of all plant and animal species at increased risk of extinction if temperatures rise between 1.5-2.5C

Glaciers and snow cover expected to decline, reducing water availability in countries supplied by melt water

This report is based on actual observed data rather than models. Ian Pearson, environment and climate change minister, said: “This report provides further evidence of why all countries need to work urgently to agree a global deal to combat climate change. But reducing emissions is not enough. We must plan for the changes ahead, including changed stability and security conditions.”