Bah! I keep getting this encoding error in rails with ruby 1.9.2
staging:
  adapter: mysql
  database:something
  encoding: utf8
  username: something
  password: something
  host: localhost

production:
  adapter: mysql
  database:something
  encoding: utf8
  username: something
  password: something
  host: localhost

Encoding.default_external = "UTF-8"
require ::File.expand_path('../config/environment',  __FILE__)
run Someappname::Application

# Load the rails application
require File.expand_path('../application', __FILE__)
Encoding.default_external = Encoding::UTF_8
Encoding.default_internal = Encoding::UTF_8
Someappname::Application.initialize!

Encoding.default_external = Encoding::UTF_8
Encoding.default_internal = Encoding::UTF_8

+--------------------------+----------------------------+
| Variable_name            | Value                      |
+--------------------------+----------------------------+
| character_set_client     | latin1                     |
| character_set_connection | latin1                     |
| character_set_database   | utf8                       |
| character_set_filesystem | binary                     |
| character_set_results    | latin1                     |
| character_set_server     | latin1                     |
| character_set_system     | utf8                       |
| character_sets_dir       | /usr/share/mysql/charsets/ |
+--------------------------+----------------------------+

+----------------------+-------------------+
| Variable_name        | Value             |
+----------------------+-------------------+
| collation_connection | latin1_swedish_ci |
| collation_database   | utf8_general_ci   |
| collation_server     | latin1_swedish_ci |