Two jumps ahead...

While most of us are still pondering the implications of 2 billion bushels of corn going into ethanol, some investors are looking further ahead.

And last month Goldman Sachs (Charts), the world's largest investment bank, poured $27 million into Iogen, a Canadian-based biotech specializing in ethanol made from cellulose.

It used to be thought that this fuel, which some argue has the potential to replace more than two thirds of all gasoline used in the U.S., was decades away from commercial viability.

But high gas prices, a touch of technical innovation, and a healthy dose of capital may move that date up.

"There are a lot of people who think the technology is there," and could be competitive even if oil prices return to $30 a barrel, said Greg Bohannon, a managing partner at Greenrock Capital, a California-based private equity fund that focuses on renewable energy. "Why would Goldman Sachs invest in a company that's not going to be commercially viable for 10 years?"

Chances are, they didn't.

Cellulosic ethanol has always seemed like a great idea for my grandson. I had forgotten to take into account what $70 oil makes possible.

$70 oil can:

• get research grants funded
• attract venture capital
• constrain consumption
• build infrastructure

All these things are possible because now when you save or replace a barrel of oil, you keep - you guessed it - $70. Most farmers, who have long since forgotten how markets and people really act because of our artificial Subsidy-World, will soon learn how economic substitution works.

Regardless of whether cellulosic ethanol is sooner or later, the source of the cellulose could be the pivotal question. Corn stover, frequently mentioned, is a prime candidate for several reasons.

First, we will have plenty of it, seeing as how we'll be growing all that corn for ethanol. Second, the technology to handle it is already in place - large balers, special trailers, etc. Third, the ag lobby will be all over this idea, seeing a chance to sell chisel-clogging residue for real US dollars, so there could be yet another subsidy somewhere in those shucks.

But my point - which you suspected I had mislaid, I'll bet - is this. How much fertilizer, especially P & N will it take when you take the corn and the stover off every year?

I think the smart money is in phosphate mines or manure contracts. If we could site a NH3 plant in the US, I'd buy into that too. I've already talked about our significant - and growing - foreign N dependence. [When my archives are ready, you can link to past blither. Soon, very soon]

Ethanol is going to make a lot of people wealthy. A few may be farmers.

Homework: If corn prices are $3.25 for fall delivery, what will you offer for cash rent for 200 prime acres 2 miles from your farm?

This could be the most exciting time of my career.

And the riskiest - or are those the same thing?