How does ethanol, and other biofuels, play into the outlook for agricultural commodities in the near future?
Warner: Ethanol’s really complicated. For me, the white elephant in the room is the Blender’s Credit. That government subsidy doesn’t go to the farmer, like everyone thinks it does; it doesn’t even go to the ethanol producer. That $0.42 goes to the Enrons and the Valeros. They control the price of ethanol. So that’s really frustrating to the farmer. Having said all that, I think the ethanol plants will run. People are buying the ones that have folded at $0.50 on the dollar, and that’s not because ethanol is stupid. It’s because people paid way too to build these plants, and took on way too much leverage. And like with most bubbles, it all has to get de-leveraged. So they’re being sold at the right price now. That ethanol they’re making, it directly underpins the price of corn, but it also indirectly influences other commodities, because farmers take away acreage from other crops. It has to come out of another commodity, which will tend to raise the price. As I see it, ethanol is a grea
