Bailouts for commodity speculators
Submitted by Econbrowser
If automakers are lining up at the trough, why not Big Agra?
Scott Irwin alerts me to this story from DomesticFuel.com:
Ethanol plants that have been hurt by dramatic fluctuations in commodity prices this year could be eligible for assistance from the US Department of Agriculture.
Secretary of Agriculture Ed Schafer told reporters after an address to the World Food Prize breakfast in Des Moines Friday that “some plants are under pressure because they’ve been speculating on corn.”
Schafer said there are USDA programs that could, for example, help the companies refinance and reduce their interest rates on operating expenses such as corn purchases. USDA’s Rural Development Program can lend up to $25 million to refinance or loan guarantees. “We have several ways we can help with dollars in rural areas,” Schafer said.
Some ethanol companies, most notably VeraSun, speculated on corn prices during the summer and locked in prices when corn was at $7 per bushel and now cash prices are about $3.50 per bushel, causing some significant losses. “There is going to have to be some credit applied to companies to buy some lower-priced corn to blend with their higher-priced corn obligations,” Schafer said.
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