Agriculture is in energy business now, Purdue economist says

Chris Hurt, a Purdue agricultural economist who reported to a lunch-time audience on global commodity prices, said the agricultural industry has become linked with energy through economics and biofuel development, just as it became tied to the issues of health and nutrition and the environment.

Hurt said his analysis of commodity prices that began to soar last March indicates that a lot of the "finger-pointing" is off-target.

He dismissed speculators, growing demand from China and India, crop losses from weather and farmers themselves as not being the real culprits.

Instead, he said, the "driving forces" behind the worldwide surge in prices for oil, corn and other commodities are supply and demand, the weak U.S. dollar, and the way agricultural markets are now tied to energy markets.

"Corn prices are linked to energy prices. One-third of the corn we're going to raise this year is going to go to ethanol production," he said.

Hurt said that means an additional one billion bushels of corn a year are needed to meet energy demands for 2007, 2008, and 2009, after which the demand will level off.

"What comes after that? We don't know," he said.

He also noted that 25 to 30 percent of the increased price for corn, which rose from $2 a bushel to as much as $8 over the last five years, is related to the value of the dollar, which has weakened against the euro and other world currencies.

But, he said, "Oil prices are coming down now because world economies are slowing."

Involvement of Indiana farmers with development of wind energy was the topic of Jimmie Bricker, extension educator for Benton County, the state's hot spot for the building of "wind farms" with projects under way by BP Alternative Energy of Texas and Orion Energy Systems of California.

"There, we're in the middle of the biggest concentration of wind turbines in the world -- that is, for a short while, because wind energy is growing. Take this thing seriously, 'cause they're backed by huge bucks," Bricker said.

He listed more than a dozen counties, including Porter and LaPorte, where officials have contacted his office about his county's 16-page wind farm ordinance that is serving as a model for the rest of the state.

He attributed wind power interest in Indiana to incentives in the Federal Energy Act and the state's climate patterns, but added the state legislature has not yet determined whether wind farms will be taxed as real property, personal property or utilities.