However, the largest crop cuts were in soybeans taken out of production,
driving soy prices up, and thus meat prices. A glut of producers switching
to corn to hitch their wagons to ADM's lucre from lobbying the guppies in
congress for the worst energy policy in decades - corn-based ethanol,
affected all crops - wheat, soy, cotton, etc. which it seems return far
lower dollars per acre than corn, particularly irrigated. Growth in corn
output for ethanol not only cuts back on other crops, but takes unused (or
rotated fallow land) back into corn production.
>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>
But this is not what happened, there was no decline in wheat acres
prior to or during the run up in wheat prices in '07 and '08 and there
was an actual decline in wheat acres planted in '09 as the price came
crashing down. All this also overlooks the rise in rice prices which
were caused by the rise in wheat prices and some countries limiting
exports of rice (India and Thailand). So while ethonol can explain
some of the rise in corn prices it does not explain the rise in Wheat
and rice prices, or oil!. The only thing that explains all of these
commodities moving up together is the increase in speculation through
commodity index funds (bets on baskets of commodities).
Brad