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Department of Economics
Feed for Fuel: Coping with the New Reality
2009 Western Canadian Association of Swine Veterinarian’s Annual Conference
Saskatoon, SaskatchewanOctober 16, 2009
Chad HartAssistant Professor/Grain Markets Specialist
chart@iastate.edu515-294-9911
Department of Economics
Crude Oil Prices
Source: EIA
0
20
40
60
80
100
120
140
Jan-
86
Jan-
88
Jan-
90
Jan-
92
Jan-
94
Jan-
96
Jan-
98
Jan-
00
Jan-
02
Jan-
04
Jan-
06
Jan-
08
$ pe
r ba
rrel
Department of Economics
Ethanol, “Fuel of the Future”
Photo Source: Nebraska Historical Society
Famous quote from Henry Ford
Many early automobiles ran on ethanol
The U.S. has gone through several waves of ethanol experimentation
Department of Economics
Ethanol Plant Map
Source: Ethanol Producer Magazine
Department of Economics
Ethanol Production
Source: F. O. Licht
0
10
20
30
40
50
60
70
2004 2005 2006 2007 2008
Billi
on li
ters
US Brazil China India Canada Others
Department of Economics
Ethanol Margins
Source: ISU, CARD
Department of Economics
0
5
10
15
20
25
30
35
40
200
9
201
0
201
1
201
2
201
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201
4
201
5
201
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201
7
201
8
201
9
202
0
202
1
202
2
Bill
ion G
allo
ns
Conventional Biofuels Cellulosic Biofuels
Biodiesel Additional Advanced Biofuels
Renewable Fuels Standard (RFS)
60% GHG Emission Reduction
50% GHG Emission Reduction
20% GHG Emission ReductionIf construction started after Dec. 2007
Department of Economics
Outside Influences (Jan. 2007 = 1)
0.5
1.0
1.5
2.0
2.5
3.01/3
/200
7
3/3
/200
7
5/3
/200
7
7/3
/200
7
9/3
/200
7
11/3
/20
07
1/3
/200
8
3/3
/200
8
5/3
/200
8
7/3
/200
8
9/3
/200
8
11/3
/20
08
1/3
/200
9
3/3
/200
9
5/3
/200
9
7/3
/200
9
9/3
/200
9
Corn Soybeans Wheat Oil
Department of Economics
Hog Returns vs. Corn Prices
Sources: ISU Extension, Farrow-to-Finish;USDA-NASS
-50
-40
-30
-20
-10
0
10
20
30
Sep-06
Jan-07
May-07
Sep-07
Jan-08
May-08
Sep-08
Jan-09
May-09
Sep-09
$ p
er
hea
d
2
3
4
5
6
$ p
er
bush
el
Department of Economics
U.S. Corn Supply and Use
Source: USDA
2004 2005 2006 2007 2008 2009
Area Planted
mha 32.8 33.1 31.7 37.8 34.8 35.0
Production mmt 300 282 267 331 307 331
Feed & Residual
mmt 156 156 142 150 133 137
Ethanol mmt 34 41 54 77 93 107
Exports mmt 46 54 54 62 47 55
Season-Average Price
$U.S./mt
81.10 78.74 119.69 165.35 159.84 131.89
Department of Economics
U.S. Soybean Supply and Use
Source: USDA
2004 2005 2006 2007 2008 2009
Area Planted
mha 30.4 29.2 30.6 26.2 30.6 31.4
Production mmt 85 84 87 73 81 88
Crush mmt 46 47 49 49 45 46
Exports mmt 30 26 30 32 35 36
Season-Average Price
$U.S./mt
210.87 207.94 236.22 371.05 366.27 330.64
Department of Economics
U.S. Wheat Supply and Use
Source: USDA
2004 2005 2006 2007 2008 2009
Area Planted
mha 24.1 23.2 23.2 24.5 25.6 23.9
Production mmt 59 57 49 56 68 60
Feed & Residual
mmt 5 4 3 0 7 5
Food & Other
mmt 25 25 26 26 25 26
Exports mmt 29 27 25 34 28 24
Season-Average Price
$U.S./mt
124.91 125.64 156.50 238.06 249.08 178.18
Department of Economics
Canadian Corn Supply and Use
Sources: FAPRIAgriculture and Agri-Food Canada
2004 2005 2006 2007 2008 2009
Area Harvested
mha 1.07 1.09 1.06 1.37 1.17 1.19
Production mmt 8.84 9.33 8.99 11.65 10.59 10.18
Feed mmt 7.91 8.55 8.43 10.26 8.43 7.96
Food & Other
mmt 2.41 2.29 2.98 3.57 3.80 4.30
Imports mmt 2.13 1.68 1.79 2.30 1.30 2.20
Department of Economics
Canadian Soybean Supply and Use2004 2005 2006 2007 2008 2009
Area Harvested
mha 1.17 1.17 1.20 1.17 1.20 1.39
Production mmt 3.04 3.16 3.46 2.70 3.34 3.55
Crush mmt 1.55 1.50 1.52 1.38 1.28 1.35
Exports mmt 0.74 0.97 1.45 1.47 1.56 1.70
Sources: FAPRIAgriculture and Agri-Food Canada
Department of Economics
Canadian Wheat Supply and Use2004 2005 2006 2007 2008 2009
Area Harvested
mha 9.39 9.40 9.68 8.64 10.03 9.56
Production mmt 24.80 25.75 25.27 20.05 28.61 22.50
Feed mmt 4.07 4.11 4.84 2.08 4.10 2.75
Food & Other
mmt 4.17 4.14 4.21 4.23 3.51 3.52
Exports mmt 14.62 15.73 19.11 15.73 18.10 16.30
Sources: FAPRIAgriculture and Agri-Food Canada
Department of Economics
Factors Leading to Higher Commodity Prices
Source: USDA-ERS, Trostle, July 2008
Department of Economics
Crude Oil Prices
Sources: EIA, NYMEX
0
20
40
60
80
100
120
140
Jan-
86
Jan-
88
Jan-
90
Jan-
92
Jan-
94
Jan-
96
Jan-
98
Jan-
00
Jan-
02
Jan-
04
Jan-
06
Jan-
08
Jan-
10
Jan-
12
Jan-
14
Jan-
16
$ pe
r ba
rrel
Department of Economics
Projected Ethanol Production
Source: FAPRI
0
20
40
60
80
100
120
140
2010 2011 2012 2013 2014 2015 2016 2017 2018
Billi
on li
ters
US Brazil Canada Other
Department of Economics
Renewable Fuels Standard (RFS)
0
2
4
6
8
10
12
14
16
2009 2010 2011
Bill
ion g
allo
ns
Additional Advanced Biofuels Biodiesel
Cellulosic Biofuels Conventional Biofuels
CropYear
Billion Bushels
2008 3.57
2009 4.11
2010 4.43
2011 4.64
Department of Economics
Bio-based Market Opportunities
Source: Informa Economics, Biobased Multi-Client Study, March 2006
Department of Economics
Biobased Pathways
Source: USDA, 2008, U.S. Biobased Products: Market Potential and Projections Through 2025
Department of Economics
Dept. of Energy Projections
Source: Energy Information Administration,Annual Energy Outlook 2009
Department of Economics
Draft Lifecycle GHG Reductions
Source: EPA, May 2009
Department of Economics
1.5
2
2.5
3
3.5
0% 5% 10% 15% 20% 25% 30%
Stocks-to-use ratio
Pric
e ($
per
bus
hel)
Corn1990 - 2006
Department of Economics
2007/082008/092009/10 May
2009/10 June
2009/10 July
2009/10 Aug.2009/10 Sept. 2009/10 Oct.
1.50
2.00
2.50
3.00
3.50
4.00
4.50
0% 5% 10% 15% 20% 25% 30%
Stocks-to-use ratio
Pric
e ($
per
bus
hel)
Corn
Department of Economics
U.S. Corn Supply and Use
Source: FAPRI
2010 2011 2012 2013 2014 2015
Area Planted
mha 35.5 35.6 35.8 35.9 36.3 36.7
Production mmt 323 328 334 339 347 355
Feed & Residual
mmt 134 132 132 131 132 133
Ethanol mmt 109 117 119 124 130 134
Exports mmt 45 47 48 50 51 53
Season-Average Price
$U.S./mt
145.37 151.52 152.77 158.43 161.22 162.90
Department of Economics
U.S. Soybean Supply and Use
Source: FAPRI
2010 2011 2012 2013 2014 2015
Area Planted
mha 30.5 30.8 31.0 31.1 31.1 31.1
Production mmt 85 87 88 89 90 91
Crush mmt 48 50 51 52 53 54
Exports mmt 32 33 33 33 32 32
Season-Average Price
$U.S./mt
322.72 333.40 341.50 350.76 359.32 365.05
Department of Economics
U.S. Wheat Supply and Use
Source: FAPRI
2010 2011 2012 2013 2014 2015
Area Planted
mha 24.3 24.1 24.0 23.9 23.7 23.6
Production mmt 61 61 61 61 62 62
Feed & Residual
mmt 6 6 6 6 6 6
Food & Other
mmt 27 27 27 27 28 28
Exports mmt 28 29 29 29 29 29
Season-Average Price
$U.S./mt
193.06 198.87 202.49 207.51 212.25 215.15
Department of Economics
Canadian Corn Supply and Use
Source: FAPRI
2010 2011 2012 2013 2014 2015
Area Harvested
mha 1.29 1.31 1.30 1.29 1.29 1.30
Production mmt 11.94 12.21 12.24 12.25 12.37 12.56
Feed mmt 7.38 7.64 7.93 8.04 8.13 8.18
Food & Other
mmt 4.58 4.71 4.76 4.80 4.84 4.89
Imports mmt 0.06 0.17 0.47 0.60 0.58 0.50
Department of Economics
Canadian Soybean Supply and Use
Source: FAPRI
2010 2011 2012 2013 2014 2015
Area Harvested
mha 1.16 1.15 1.15 1.15 1.16 1.17
Production mmt 3.20 3.17 3.19 3.22 3.25 3.29
Crush mmt 1.39 1.40 1.41 1.44 1.47 1.49
Exports mmt 1.40 1.42 1.43 1.44 1.46 1.45
Department of Economics
Canadian Wheat Supply and Use
Source: FAPRI
2010 2011 2012 2013 2014 2015
Area Harvested
mha 9.34 9.21 9.12 9.05 8.95 8.89
Production mmt 25.35 25.16 25.11 25.09 25.01 25.02
Feed mmt 3.52 3.62 3.74 3.81 3.86 3.90
Food & Other
mmt 5.08 5.16 5.23 5.29 5.34 5.40
Exports mmt 16.27 16.06 15.99 15.96 15.89 15.80
Department of Economics
U.S. Hog Statistics
Source: FAPRI
2010 2011 2012 2013 2014 2015
Hog Inventory mil. head
59.86 59.76 60.26 61.28 62.33 63.59
Live Hog Imports
mil. head
7.10 7.07 7.25 7.29 7.46 7.50
Production mmt 10.30 10.42 10.57 10.82 11.09 11.37
Consumption mmt 8.73 8.77 8.84 8.95 9.09 9.27
Exports mmt 1.57 1.64 1.73 1.86 1.99 2.09
Barrow & Gilt Price
$U.S. per cwt.
53.04 55.04 56.26 54.79 53.98 53.70
Department of Economics
Canadian Hog Statistics
Source: FAPRI
2010 2011 2012 2013 2014 2015
Hog Inventory mil. head
11.37 12.30 13.19 13.56 14.10 14.18
Live Hog Exports
mil. head
7.10 7.07 7.25 7.29 7.46 7.50
Production mmt 1.86 1.95 2.02 2.04 2.06 2.07
Consumption mmt 0.98 1.00 1.01 1.04 1.05 1.06
Exports mmt 0.88 0.95 1.01 1.01 1.01 1.01
Pork Farm Price
$C per cwt.
66.41 63.95 64.13 61.91 62.76 64.44
Department of Economics
Thank you for your time!
Any questions?
My web site:http://www.econ.iastate.edu/faculty/hart/