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The CommStock Report

Friday, September 14, 2012

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David Kruse, president of CommStock Inc.
A CommStock Report listener commented:

"It seems more and more of your commentaries are time spent defending ethanol. If there is one major flaw in the ethanol industry it is the fact that they went to the government for their market and not the consumer. Henry Ford did not go to the government, but the consumer. It is time for the industry to go to the consumer for their market. That is how markets should work."

Guess what? Henry produced cars that ran on ethanol up until Prohibition. Ford controlled a fair share of the fuel market producing alcohol. The petroleum industry was a big backer of Prohibition because it shut down Ford's alcohol production. Prohibition ended when Henry conceded to start making cars that ran on petroleum. The petroleum industry used Prohibition to dictate the market to Henry. I'll bet that you didn't know that.

Biofuel is a national security issue. It is in this country's interest to produce and consume home-grown fuel so we can let someone else float aircraft carriers in the Persian Gulf. We spend hundreds of billions of dollars adding to our deficit defending the world's oil supply for which there is no reimbursement from China, Japan, South Korea, Germany and all the others to the Pentagon. US taxpayers foot the entire bill. This is insane, yet I have never heard either party or candidate for President call it what it is. One blocked a pipeline bringing us Canadian oil and the other is a neo-con resolved for another War.

It is within our ability within 5-10 years for this hemisphere to become self-sufficient in oil so that we don't need one barrel of oil produced anywhere outside North and South America and the Aircraft carrier battle groups and troops in the Mid-east can come home. The RFS and biofuels will play a strong role in making that happen. The Petroleum industry that wraps itself in the flag puts its interests above those of this country.

The blender's credit is gone but the same Senators that voted to end the ethanol subsidy also voted down measures to end subsidies to oil companies. The spin that they are ideologically opposed to subsidies is subterfuge to cover the water that they carry for Big Oil. If the market is so good for ethanol why should Big Oil need subsidies to make it?

The petroleum industry is doing everything they can to stop E-15 from becoming a consumer choice. Again this is total hypocrisy from those who profess to let the market work but use every means and politician that they can buy to force consumers to buy their oil. Brazilians burn E-20/E-25 in every vehicle in the country without consequence. Our vehicles can certainly use E-15 which is why the petroleum industry has done everything they could to stop it.

The RFS lets the market work. The ethanol industry is going to the consumer whenever they can get past the oil distribution oligopoly doing everything they can to deny consumers access to biofuel.

Ethanol is the third leg along with livestock and export demand on the stool that supports the Ag economy. We have the best Ag economy ever today because of biofuel. A two legged stool doesn't stand very well and those that want cheap grain are looking to kick one leg out from under it. The farm program subsidized corn farmers for years to keep them in business so that burdensome grain stocks were perpetuated, providing commercial livestock producers cheap, below-cost feed. They now have the audacity to claim to oppose subsidies when corn subsidies built their business.

The subsidies are gone and corn growers are now getting their income from the market. The market also supports ethanol production from demand for ethanol as an oxygenate to eliminate MTBE poison from gasoline and also as an octane booster.

You mention that I spend a lot of time defending ethanol. That is true. The oil industry has spent millions of dollars in a professional public relations campaign to disparage it to the consumer. Is that your idea of the market working? The reason that I spend so much time talking about ethanol is that there are many, including the gentleman who commented, who really don't get it.

The petroleum industry is educating the public with false information. I have pointed out how the major media is buffaloed. Someone needs to tell the facts. I volunteered for what I believe is the good of the country and the Ag sector. Most agree.

David Kruse is president of CommStock Investments,Inc., author and producer of The CommStock Report, an ag commentary and market analysis available daily by radio and by subscription on DTN/FarmDayta and the Internet. CommStock Investments is a registered CTA, as well as an introducing brokerage.



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