Transcript Bioeconomy Impacts on Midwestern Agriculture Chad Hart Center for Agricultural and Rural Development Iowa State University August 29, 2007 Iowa Maintenance Training Expo Ames, Iowa E-mail: [email protected].

Bioeconomy Impacts on Midwestern
Agriculture
Chad Hart
Center for Agricultural and Rural Development
Iowa State University
August 29, 2007
Iowa Maintenance Training Expo
Ames, Iowa
E-mail: [email protected]
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
Biodiesel Growth
250
Million Gallons
200
150
100
50
0
1999 2000 2001 2002 2003 2004 2005 2006
Source: National Biodiesel Board
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
MI
KS
Current Capacity
(million gallons)
1,924
896
875
617
615
292
278
214
207
State
MO
ND
CO
CA
TN
AZ
KY
OR
NM
Current Capacity
(million gallons)
157
134
85
68
67
55
35
35
30
Biodiesel – State by State
State
IA
TX
FL
WA
AL
IL
NJ
MN
TN
Current Capacity
(million gallons)
257
150
139
116
95
94
74
63
59
State
CA
MO
OH
MI
CO
MS
AR
WI
GA
Current Capacity
(million gallons)
50
46
38
35
29
28
27
25
23
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 2009, ethanol
production capacity could exceed 13.5 billion
gallons
• Announced biodiesel capacity exceeds 2.5
billion gallons
Ethanol – State by State
State
IA
NE
IL
MN
SD
IN
OH
KS
WI
TX
Current Capacity
(million gallons)
1,924
875
896
617
615
292
4
207
278
0
Being Built
1,745
878
291
513
378
616
529
295
220
385
Total
3,669
1,753
1,187
1,130
993
908
533
502
498
385
Biodiesel – State by State
State
IA
TX
IL
AL
FL
NJ
IN
ND
WA
NV
Current Capacity
(million gallons)
257
150
94
95
139
74
11
116
4
Being Built
95
113
105
60
13
60
120
123
105
Total
352
263
199
155
152
134
131
123
116
109
Projected Corn Utilization
70
60
50
%
40
30
20
10
Marketing Year
Feed
Ethanol
Exports
Other
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
/0
9
98
/9
8
97
/9
7
/9
96
95
/9
6
0
That’s A Lot of Corn
• 13.5 billion gallons of ethanol translates into
4.9 billion bushels of corn
– That’s more than the combined corn output of
Iowa, Illinois, and Wisconsin in 2006.
• Ethanol demand for corn has put tremendous
pressure on the corn market
• It will likely take both supply and demand
shifts to balance out the corn market.
Beef
Pork
Poultry
06
20
05
20
04
20
03
20
02
20
01
20
00
20
99
19
98
19
97
19
96
19
95
19
Billion Pounds
U.S. Livestock Production
40
35
30
25
20
15
World Corn Exports in 2005/2006
6%
12%
3%
5%
74%
Argentina
Brazil
China
United States
Rest of World
World Ethanol Imports, 2006
2%
8%
15%
62%
10%
3%
U.S.
EU
India
Japan
South Korea
Rest of World
Oil Futures As Of 8/28/2007
73
72
$ per barrel
71
70
69
68
67
66
Oct.
2007
Dec.
2007
Dec.
2008
Dec.
2009
Dec.
2010
Dec.
2011
Dec.
2012
1/
20
10 06
/1
/2
0
11 06
/1
/2
12 006
/1
/2
00
6
1/
1/
20
07
2/
1/
20
3/ 07
1/
20
07
4/
1/
20
5/ 07
1/
20
07
6/
1/
20
7/ 07
1/
20
07
8/
1/
20
07
9/
$ per bushel
Nearby Corn Futures
4.50
4.00
3.50
3.00
2.50
2.00
Corn Futures As Of 8/28/2007
4.20
$ per bushel
4.00
3.80
3.60
3.40
Dec. 2007
Dec. 2008
Dec. 2009
Dec. 2010
Support for More Corn Acres
• Futures prices are providing a definite signal
for more corn acres
• Ethanol’s demand for corn continues to
increase
• This is despite the 15% jump in corn acreage
in 2007
Where Will the Acreage Come From?
State
Illinois
Indiana
Iowa
Kansas
Kentucky
Michigan
Minnesota
Missouri
Nebraska
Ohio
South Dakota
Wisconsin
2000-2006 Average
Corn
Soybeans
(acres)
11,421
10,236
5,657
5,571
12,386
10,450
3,314
2,850
1,217
1,279
2,221
2,036
7,214
7,257
2,864
5,050
8,307
4,743
3,371
4,493
4,350
4,179
3,636
1,610
Percentage of
Acreage in Corn
53%
50%
54%
54%
49%
52%
50%
36%
64%
43%
51%
69%
If the States Followed a 2/1 Rotation
Corn
Soybeans
(acres)
14,438
7,219
7,486
3,743
15,224
7,612
4,110
2,055
1,664
832
2,838
1,419
9,648
4,824
5,276
2,638
8,700
4,350
5,243
2,621
5,686
2,843
3,497
1,749
Ethanol-Livestock Synergies
Plant Location
A 50-Million Gallon Ethanol Plant …
• Uses roughly 18.5 million bushels of corn
– In Iowa, corn from 116,000 acres
• Produces 315 million pounds of distillers
grains
– This could feed approx. 60,000 dairy cattle or
17.26 million layers
• Utilizes natural gas/coal in plant operations
– Manure from 60,000 dairy cattle could produce
methane to meet part of the ethanol plant’s energy
needs
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