The New “Gold” Standard?

Very recently in the history of the global market, it has become not only fashionable, but highly lucrative to peddle all things “green”. Today consumerism is stronger than ever and thriving in every corner of the world, even the historically red corners. Along with this boon of capitalism and consumerism the world’s inhabitants are becoming increasingly aware of their collective affect on their environment and many begin to look for ways to decrease that affect as much as possible.

This “green” revolution has been spear-headed by the affluent living in developed countries who possess the disposable income necessary to pay for those products which promise to be “Earth-Friendly”, which tend to be much more expensive than their non-green counterparts. A myriad of green products are now being practically thrown at the public by opportunistic companies nimble enough to jump on the 100% organic, completely biodegradable, hormone-free bandwagon.

In the United States, artificially high sugar prices have been created by imposing high tariffs on imported sugar and quotas on High Fructose Corn Syrup which ensure that American corn will remain in high demand. Sugar is not a domestic crop, so its importation would provide stiff competition for American farmers who are growing crops in a soil and climate which are much friendlier to corn. It doesn’t help the situation that one of the world’s greatest producers of sugar cane also happens to be one of the only countries on the planet the United States refuses to do business with. These protectionist trade policies not only have a major influence on what Americans put into their bodies, they also “add fuel” to the alternative energy political bonfire now being danced around by U.S. politicians.

While the legislation creating these tariffs and quotas was being pushed by congressmen, many if not all of whom held a constituency in an agro-state, they touted High Fructose Corn Syrup as cheaper and easier to process than cane sugar without sacrificing any of that great sucrose taste! However, anyone who has snagged a can of “Kosher Pepsi” being sold around Passover time, or grabbed a “Mexican Coke” while browsing the international food section at their local grocer can attest that the taste of sodas was fundamentally altered with the change from sugar to High Fructose Corn Syrup. Cane sugar was the best ingredient removed from Coke, since well, the “super special-ingredient” that got tossed back in 1904.

Like oil, gold and other commodities, the price of corn has taken a dive recently, thanks in large part to the strengthening of the U.S. dollar. The dollar had shown some moxie this summer, and rallied against its counterparts in Europe and Asia, pushing commodity prices down as it climbs steadily up. Corn made its biggest gains early this past summer following floods throughout America’s bread basket, setting a record high of $7.96 a bushel on June 27^th. The crop took hits in July and August before beginning a steep decline this fall, it’s been trading at $3.84 this week after making modest picking up a few modest gains recently.

This can only be seen as a temporary set-back for corn, which has seen a dramatic increase in demand since Ethanol has become this country’s “it” solution to the energy crunch. While America is caught in the same economic whirlpool the rest of the world finds itself in, the dollar is comparatively strong. Gaining ground against the currencies of countries that are doing even worse than us, a stronger dollar has decimated most commodities’ prices, including corn, but most dramatically in crude oil. While Ethanol is a favorite pick of many congressmen and farmers alike, it faces a stable of other renewable energy sources which have been shown to be more eco-friendly, cost-effective and just simpler to implement, without the downside of further stressing an already burdened global food market.

However, regardless of whether or not ethanol is the best choice among fuel alternatives, this corn product has proven to be and will remain the major player in decreasing petroleum dependence in America, at least in the foreseeable future. Both presumptive Presidential nominees had pledged their unwavering allegiance to this corny solution, even when confronted with its obvious downfalls by members of the scientific community. But general public support for ethanol additives remain strong, in poll after poll the majority of Americans say that they want to see more ethanol at the pumps. Now after a long election cycle obsessively fixated on the vague promise of “Change”, constituents will be anxious to see this change put in action, early in either the Obama presidency. The only other major, quick solution to American’s foreign oil dilemma being discussed today is offshore drilling and even oilmen eager to set up shop in American coastal waters concede that we will not see any of that oil at our pumps for another 7-10 years. This leaves ethanol as an attractive quick fix to satiate Americans who will be hungry for that “Change” everyone’s been talking about. New E85 equipped gas stations are already being established on a fairly regular basis and old ones are being retrofitted to dispense that starchy goodness.

Commodities are traded through stock futures, and these futures are directly related to the cost of that commodity. With prices taking a nearly two dollar hit in the dog days of summer and then plummeting in the market crash has made this future very buyable. Corn is a staple food crop around the world, a must-add ingredient to every snack food or soda in America and now its quickly becoming the foundation of a green fuel initiative here in the States. All of these variables have made corn a relatively safe, reliable investment with an outstanding potential for explosive growth.

Regards,

Justin Picard
Editor of Naked Stocks

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Tags: commodities, energy, ethanol, gold, green, investing, stocks