"The 2 links I have sent really deal with the same issue, the potential for grains to continue being in tight supply and food and gasoline prices to remain at high levels (currently over $4.00 for regular gas in Southern California).

"The first link is a drought monitor map that allows you to look at any month in the last decade. The way I read it, conditions currently are worse in the Southwest and Central U.S. than certainly the last 2 years. This may not be the so called Corn Belt area, but it is an important growing area and a poor crop yield would certainly have an impact on grain prices. From what I read, if there is not significant moisture in the next two weeks, experts have pretty much thrown in the towel for a bountiful crop this year.

"The other link shows the almost total non-availability of ethanol 85 in Southern California. I mention this because I often have a problem understanding the policies of the U.S. government. We have recently extended the subsidy and the supply requirements for ethanol. This happens at a time when we are facing a potential global food and hunger crisis.

"So ethanol 85 for use in automobiles is being produced and automobiles that are capable of using this fuel are being manufactured and sold or rented. I know this because I was recently waiting at a drive-up pharmacy behind someone who had a flex-fuel ethanol 85 vehicle. I got out of my car and asked the driver if she was using ethanol. She had no idea what I was talking about and actually told me that the car was a rental from Hertz. I remember the "we try harder" commercials of Avis when they were number 2 to Hertz. I would assume that Hertz remains the largest or one of the largest rental agencies. Now I know they rent ethanol capable vehicles. But there are no gas stations that sell ethanol in Southern California which is no small area or population. Apparently, there are more stations that carry ethanol 85 in the east, but something just does not add up in this policy of requiring corn-based ethanol production.

"One other note. You said months ago that you were not going to speculate in grain futures because of the potential world hunger situation. I admire that greatly, but it seems like a bit of a slippery slope. If we stayed away from investments in companies or commodities that have the potential to cause damage one way or another, would we not have to stay clear of mining and energy? I realize we do not eat copper or oil, but they certainly play an important role our world. Also, I believe that you are creating a market by speculating or taking the opposite side of the commercial hedger. And do you continue to stay clear of corn when and if it returns to the 3$-4$ range? I guess that I am questioning my own occasional speculations more than anything in bringing up these points."

Eoin Treacy's view Thank you for this informative email. Just about all gasoline sold in the USA today uses ethanol as an oxygenate in preference to MTBE which has been discarded because it is carcinogenic. This can viewed as a base level requirement for ethanol.

E85 is a fuel blend using 85% ethanol but as you point out if far from ubiquitous. A flex-fuel car can run on any blend so is not dependent on E85 refilling stations. In Southern California E85 is 16.8% cheaper than gasoline according to E85Prices.com but it is 25-30% less efficient according to the US Department of Energy. One does have to be a statistician to see that E85 does not offer value for money on an energy equivalency basis.

The only way E85 could be a viable alternative is for prices to be much lower than they are now. That would mean displacing corn based ethanol with sugar based ethanol which is half as expensive to produce. Brazil is currently the largest producer of sugar based ethanol. Corn based ethanol is not competitive against sugar based ethanol but Brazilians do not vote in US elections and MidWest farmers do. The present situation where 40% of the US corn crop is devoted to ethanol production is a desperately inefficient use of this vital food commodity but there is little sign of the situation changing. (Also see Comment of the Day on March 24th).

Food commodities have all rallied over the last year as poor crop conditions compounded low inventory levels, poor access to credit, increased speculative interest and rising demand. Corn prices remain in a consistent medium-term uptrend and while the 2008 peak near 800¢ may offer an area of temporary resistance, a sustained move below the 200-day MA, currently near 600¢ would be required to question medium-term upside potential. On an inflation adjusted basis, prices appear to be in the process of breaking out of a long-term base.

With regard to the ethics of trading, this is an entirely personal matter and I believe you would be best served following your own moral compass.