Singin’ In The Rain
June 20, 2007

As expected, we got some rain on Tuesday. Zach Stahlman in Goshen got over 2″ of rain as the storm with the greatest rainfall moved across Clark and Oldham counties. Franklin Moreland reported about 8/10 ” of rain in Charlestown while other rain gauges in that area got over an inch. Jared Heil in Henryville reported an inch. But much of the rest of the area was mainly in line with forecast totals of between a quarter and 3/4 of an inch of rain. Its not enough to bust the drought, but it doesn’t hurt. Next chance for rain shows up on Saturday as what is known as a Mesoscale Convective System (MCS) appears to develop and move down from the northwest at least near our area. We’ll have to watch that for the potential for strong storms. Beyond that, rain chances appear to be limited.

Be careful for what you ask for Yes indeed…from the unintended consequence department, we have this. Corn production is up but corn prices continue to rise rapidly. The reason: increased demand for ethanol. When a commodity such as corn goes up in price, everything associated with corn goes up. For instance, one would expect beef prices to increase as the price for corn feed increases. In China they curtailed ethanol production because it was driving up corn prices so high.

You often hear of people complaining about gas prices increasing and pointing to the fact that no new refineries have gone on line in several decades. That is a bit of a red herring because I think only one oil company has even applied for a new refinery in that time. Refining profit margins are small and they can’t justify the capital risk for such a small return. But, there has been expansion of refining capacity over the past couple of decades by some 50%. Now, with the White House and Congressional push for more use of biofuels, the oil companies are scaling back plans to expand refining capacity by up to 10 percent. They feel that the billions necessary for the expansion cannot be justified in a market they expect to experience a decrease in demand. So, if this ethanol thing doesn’t work, then don’t look for gas prices to go down unless demand decreases since there will be no increase in supply.

Now, consider this…if we do go to more and more ethanol, and there is a failed corn crop, fuel prices would rise and there could even be shortages. Do we really want to be that dependent on the weather and farmer’s fortunes? In the early 20th century, the automobile was seen as an environmental savior because there was so much pollution and disease in cities associated with animal wastes. There were a lot of mules and horses doing the work. We now know that the car may have ended one form of pollution and traded it for another. The automobile is considered one of the root causes for the supposed anthropogenic(man made) global warming. The point is that there always seems to be unintended consequences associated with progress.