Transcript Ethanol and Livestock: Synergies or Competition?

Let’s Talk About Ethanol
Chad Hart
Center for Agricultural and Rural Development
Iowa State University
E-mail: [email protected]
October 2, 2007
ISU Farm Management Field Specialist
In-Service Program
Ames, Iowa
Source: Renewable Fuels Association
06
20
04
20
02
20
00
20
98
19
96
19
94
19
92
19
90
19
88
19
86
19
84
19
82
19
80
5.0
4.5
4.0
3.5
3.0
2.5
2.0
1.5
1.0
0.5
0.0
19
Billion Gallons
Ethanol Explosion
35
Renewable Fuels Standard
Billion Gallons
30
25
20
15
10
5
0
2006 2007 2008 2009 2010 2011 2012 2017
Source: Renewable Fuels Association
Ethanol Industry Snapshots
Jan. 2000
Jan. 2001
Jan. 2002
Jan. 2003
Jan. 2004
Jan. 2005
Jan. 2006
Jan. 2007
Ethanol Plants
54
56
61
68
72
81
95
110
Source: Renewable Fuels Association
Capacity (mgy)
1,749
1,921
2,347
2,707
3,101
3,644
4,336
5,493
Ethanol – State by State
State
IA
IL
NE
MN
SD
IN
WI
KS
MI
Current Capacity
(million gallons)
1,977
896
875
617
615
487
282
232
214
State
MO
ND
CO
CA
TN
AZ
OR
KY
NM
Current Capacity
(million gallons)
197
134
96
74
67
55
40
35
30
Historical Corn Utilization
70
60
50
%
40
30
20
10
Marketing Year
Feed
Ethanol
Exports
Other
/0
9
08
/0
8
07
/0
7
06
/0
6
05
/0
5
04
/0
4
03
/0
3
02
/0
2
01
/0
1
00
/0
0
99
/9
9
98
/9
8
97
/9
7
96
95
/9
6
0
Where Are We Headed?
• Based on construction announcements for
ethanol plants, by the end of 2010, ethanol
production capacity could exceed 14.5 billion
gallons
• Announced biodiesel capacity exceeds 2.5
billion gallons
Ethanol – State by State
State
IA
NE
IL
IN
MN
SD
OH
KS
WI
TX
Current Capacity
(million gallons)
1,977
875
896
487
617
615
4
232
282
0
Being Built
1,869
1,141
461
730
513
450
544
295
230
385
Total
3,846
2,016
1,357
1,217
1,130
1,065
548
527
512
385
Projected Corn Utilization
70
60
50
%
40
30
20
10
Marketing Year
Feed
Ethanol
Exports
Other
/0
9
08
/0
8
07
/0
7
06
/0
6
05
/0
5
04
/0
4
03
/0
3
02
/0
2
01
/0
1
00
/0
0
99
/9
9
98
/9
8
97
/9
7
96
95
/9
6
0
Oil Futures As Of 10/1/2007
82
80
$ per barrel
78
76
74
72
70
68
66
Nov.
2007
Dec.
2007
Dec.
2008
Dec.
2009
Dec.
2010
Dec.
2011
Dec.
2012
10/1/2007
9/1/2007
8/1/2007
7/1/2007
6/1/2007
5/1/2007
4/1/2007
3/1/2007
2/1/2007
1/1/2007
12/1/2006
11/1/2006
10/1/2006
9/1/2006
$ per bushel
Nearby Corn Futures
4.50
4.00
3.50
3.00
2.50
2.00
Corn Futures As Of 10/1/2007
4.40
$ per bushel
4.20
4.00
3.80
3.60
3.40
Dec. 2007
Dec. 2008
Dec. 2009
Dec. 2010
Ethanol Gross Margin
Net Cost of Corn
Net Cost of Nat. Gas
9/21/2007
7/21/2007
5/21/2007
3/21/2007
1/21/2007
11/21/2006
9/21/2006
7/21/2006
5/21/2006
3/21/2006
1/21/2006
11/21/2005
9/21/2005
7/21/2005
5/21/2005
3/21/2005
$ per gallon
Historical Ethanol Margins
4.50
4.00
3.50
3.00
2.50
2.00
1.50
1.00
0.50
0.00
Projected Ethanol Margins
1.60
1.40
1.20
$ per gallon
1.00
0.80
0.60
0.40
0.20
0.00
Nov-07 Feb-08 May-08 Aug-08 Nov-08 Feb-09 May-09 Aug-09 Nov-09
-0.20
Ethanol Gross Margin
Net Cost of Corn
Net Cost of Nat. Gas
Ja 7
nM 08
ar
M -08
ay
-0
Ju 8
l-0
Se 8
pN 08
ov
-0
Ja 8
nM 09
ar
M -09
ay
-0
Ju 9
l-0
Se 9
pN 09
ov
-0
9
-0
N
ov
$ per gallon
Comparing Futures Prices
2.30
2.20
2.10
2.00
1.90
1.80
1.70
1.60
1.50
Ethanol
Gasoline
10 Observations about Ethanol
1. Ethanol production growth has exceeded
expectations
–
–
Growth has exceeded forecasts and has put the
U.S. on pace to far exceed the RFS
But the industry is approaching another barrier
point (10% of gasoline usage)
2. Gasoline prices are likely to remain high
enough to support ethanol
10 Observations about Ethanol
3. Ethanol margins can remain positive over a
wide corn price range
4. Corn prices are likely to remain higher than
usual
5. Given positive margins, ethanol plants will
be competitive for corn at higher prices
10 Observations about Ethanol
6. To maintain all corn usage demands, the U.S.
will need to dramatically expand corn
acreage
7. Other countries will response to higher corn
prices as well
8. With heightened demand and thin stocks, the
corn market will be more volatile
10 Observations about Ethanol
9. Cellulosic ethanol has tremendous promise,
but it will be several years before cellulosic
ethanol truly impacts the energy markets
10. The merging of the energy and agricultural
sectors will force substantial changes in both
sectors
Basis in 2005
Basis in 2006
Basis in 2007