Ethanol & The Corn & Feed Grain Market Outlook for 2007-09 8/15/07
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Ethanol & The Corn & Feed Grain Ethanol & The Corn & Feed Grain Market Outlook for 2007-09Market Outlook for 2007-09
8/15/07
By Dr. Robert Wisner, University Professor of Economics and Coles Professor of
International Agriculture
Iowa State University Ames, Iowa, U.S.A.
For presentation at the Midwest-Great Plains Outlook Conference 8/15/07
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41 countries encourage biofuels41 countries encourage biofuelsMajor Countries with Ethanol Fuels
• U.S. • Brazil• Canada • China• EU-27• ThailandCountries considering ethanol fuels
• South Africa• Ukraine• Japan
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Major Countries with Ethanol Fuels• U.S. – likely production of 14-15 bil. gal.
from corn in 3.5-5 years• Brazil –89 new ethanol plants to be built,
2007-2011– 2% biodiesel mandate by 2008 & 5% by 2013
• China – 3 corn-based plants, emphasis shifting to other feedstocks
• EU-27 – 5.75% of motor fuel to be renewable by 2010, 10% in 2020
• Canada – 5% ethanol mandate by 2010, 2% biodiesel by 2012
• Thailand – ethanol from sugar, mantiac
Biodiesel– Competition for crop land
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International Impacts• U.S. ethanol plants under construction to
use 58 mil. tons of corn (doubling use)– 3.5 times the volume of Japan imports of
U.S. corn– 130% of 2006 EU corn crop– 70% of global corn exports
• Other countries are expanding ethanol & biodiesel
• Strong negative impacts on animal ag.• Higher food costs ahead• Major risk-management challenges in Ag. & bioenergy
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USDA 07-08
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Expanding U.S. Ethanol Industry vs. 2005-06 Corn Feeding
2005-06 U.S.Corn FeedingPotential Cornfor EthanolOther underconstruction07-08 Ethanol
Current Corn forEthanol
2005-06 U.S.Corn Feeding
Proj. Corn ethanol2011-12
'06-07 Corn for Ethanol
'07-08 Ethanol Proj.Other Constr'n
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Iowa corn processing & ethanol plants, current & planned, 10/26/06
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Sac
Linn
Lee
Ida
Tama
Clay Kosuth
Jasper
Lyon
Page
Storyr Jones
Fayette
Adair
Bentonn
Wapello
Pocahontas
Osceola
Jefferson
Audubon
Washington
BuenaVista
BlackHawk
Appanoose
CerroGordo
VanBuren
Mucatine
Dickenson
DesMoines
Winnebago
Montgomery
Iowa Corn Processing & Ethanol Plant Locations, Actual & Planned. 9/26/06,
PoweshiekPolk
BooneGreeneCarrollCrawford
Plymouth
O’Brien
Woodbury
Monona
Harrison Shelby
Wright Franklin
Floyd Chickasaw
Webster Hardin
Louisa
Emmet
Palo Alto
Hancock
Worth Mitchell HowardWinneshiek Allamakee
BremerButler
Hamilton GrundyBuchanan
Delaware
Dubuque
Jackson
Clintonn
Guthrie Dallas
Johnson
Marshall
Pottawattamie
Mills
Fremont
Madison
Warren Marion Mahaska
Keokuk
Adams Union Clarke Lucas Monroe
Taylor Ringgold
Cherokee
Calhoun
Decatur Wayne Davis
Henry
Scott
Humboldt
Clayton
Cedar
Sioux
Cass
Iowa*
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Sac
Linn
Lee
Ida
Tama
Clay Kosuth
Jasper
Lyon
Page
Storyr Jones
Fayette
Adair
Bentonn
Wapello
Pocahontas
Osceola
Jefferson
Audubon
Washington
BuenaVista
BlackHawk
Appanoose
CerroGordo
VanBuren
Mucatine
Dickenson
DesMoines
Winnebago
Montgomery
,
PoweshiekPolk
BooneGreeneCarrollCrawford
Plymouth
O’Brien
Woodbury
Monona
Harrison Shelby
Wright Franklin
Floyd Chickasaw
Webster Hardin
Louisa
Emmet
Palo Alto
Hancock
Worth Mitchell HowardWinneshiek Allamakee
BremerButler
Hamilton GrundyBuchanan
Delaware
Dubuque
Jackson
Clintonn
Guthrie Dallas
Johnson
Marshall
Pottawattamie
Mills
Fremont
Madison
Warren Marion Mahaska
Keokuk
Adams Union Clarke Lucas Monroe
Taylor Ringgold
Cherokee
Calhoun
Decatur Wayne Davis
Henry
Scott
Humboldt
Clayton
Cedar
Sioux
Cass
Iowa*
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Sac
Linn
Lee
Ida
Tama
Clay Kosuth
Jasper
Lyon
Page
Storyr Jones
Fayette
Adair
Bentonn
Wapello
Pocahontas
Osceola
Jefferson
Audubon
Washington
BuenaVista
BlackHawk
Appanoose
CerroGordo
VanBuren
Mucatine
Dickenson
DesMoines
Winnebago
Montgomery
Iowa Corn Processing & Ethanol Plant Locations, Actual & Planned. 9/26/06,
PoweshiekPolk
BooneGreeneCarrollCrawford
Plymouth
O’Brien
Woodbury
Monona
Harrison Shelby
Wright Franklin
Floyd Chickasaw
Webster Hardin
Louisa
Emmet
Palo Alto
Hancock
Worth Mitchell HowardWinneshiek Allamakee
BremerButler
Hamilton GrundyBuchanan
Delaware
Dubuque
Jackson
Clintonn
Guthrie Dallas
Johnson
Marshall
Pottawattamie
Mills
Fremont
Madison
Warren Marion Mahaska
Keokuk
Adams Union Clarke Lucas Monroe
Taylor Ringgold
Cherokee
Calhoun
Decatur Wayne Davis
Henry
Scott
Humboldt
Clayton
Cedar
Sioux
Cass
Iowa*
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Lee
Ida
Tama
Clay Kosuth
Jasper
Lyon
Page
Storyr Jones
Fayette
Adair
Bentonn
Wapello
Pocahontas
Osceola
Jefferson
Audubon
Washington
BuenaVista
BlackHawk
Appanoose
CerroGordo
VanBuren
Mucatine
Dickenson
DesMoines
Winnebago
Montgomery
,
PoweshiekPolk
BooneGreeneCarrollCrawford
Plymouth
O’Brien
Woodbury
Monona
Harrison Shelby
Wright Franklin
Floyd Chickasaw
Webster Hardin
Louisa
Emmet
Palo Alto
Hancock
Worth Mitchell HowardWinneshiek Allamakee
BremerButler
Hamilton GrundyBuchanan
Delaware
Dubuque
Jackson
Clintonn
Guthrie Dallas
Johnson
Marshall
Pottawattamie
Mills
Fremont
Madison
Warren Marion Mahaska
Keokuk
Adams Union Clarke Lucas Monroe
Taylor Ringgold
Cherokee
Calhoun
Decatur Wayne Davis
Henry
Scott
Humboldt
Clayton
Cedar
Sioux
Cass
Iowa*
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66 Planned + current in Iowa11 Just across the borders
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Figure 1.
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Iowa corn processing & ethanol plants, current & planned, 11/20/06
63
Capacity: 129% of 2006 cropCapacity: 159% of 2006 Crop
Iowa Corn Processing Plants, Current & Planned, 7/25/07
72 Potential Iowa Plants 11 Just across IA Borders
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Needed Yld. @ 2007 Acres
?
334 bu./A. @ ethanol plant rated cap.
New trend?
June 2007
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Total 11,693 mil. Bu.
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How Much More U.S. Construction to Reach 5.5 Bil. Bu. Corn for
Ethanol?• Operating plants: -- 2.15 Bil. Bu. • Plants under construction: -- 2.0 Bil. Bu. • Plants soon to build: -- 0.2 Bil. Bu. Total: 4.35 Bil. Bu. Capacity needed: 1.15 Bil. Bu. (About 32 plants @ 100 mil. gal./yr.)
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A.
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Ethanol Blending Wall?(Are we there yet?)
• Considerable incentive to increase blending capacity
• What happens when avg. Midwest blend is 10%?
• More shipments to coasts – at higher cost
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$ per Gal.
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State Avg. Ethanol Rack Prices
Averages provided by:
www.axxispetro.com
www.ethanol.org
Date: Wednesday, Aug. 08, 2007 Iowa: 2.13 Ill.: 2.21 Ks.: 2.34 Minn.: 2.15 Mo.: 2.34 N. Dk.: 2.23 Nebr.: 2.35 S. Dk.: 2.27 Wisc.: 2.21
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5.9 Bil. Bu. Corn for ethanol by 2012
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Will increased South American exports more than offset U.S. decline?
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2012
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Brazil Corn Production & Use
0200400600800
1,0001,2001,4001,6001,8002,000
1985 1990 1995 2000 2005
Mil.
Bus
hels
ExportsProductionFSl UseCorn feedingImportsSeries5Linear (Production)
2012
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Potential area to be cleared for crops
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160.4 bu/A
149.1148
142.2
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Figure 2. Corn Planting Date and YieldField Tests at DeKalb and Monmouth, Illinois, 2005 and 2006
218
225227
224
214
199
180
170
180
190
200
210
220
230
3/31 4/10 4/20 4/30 5/10 5/20 5/30
Bu./ac. 30,000 population
Source: February 2007 Newsletter Volume 26:2, Department of Crop Sciences, College of Agricultural, Consumer, and Environmental Sciences, University of Illinois, Urbana-Champaign, Illinois, www.cropsci.uiuc.edu/research/rdc/monmouth/newsletters/2007/Feb_2007.cfm.
Percent planted 4/30 Crop Progress Report:
1997-2006 avg. = 44 %
2007 = 23 %
At 10-yr. avg. pace 19 mil. additional acres would have been planted by the
end of April
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August 2007 Crop Production
Crop Unit Aug ‘07
% Chgfrom PrevForecast
% Chgfrom Prev
Season
Corn: Planted Mil
Ac92.9 NC + 18.6
Harvested Mil Ac
85.4 NC + 20.9
Yield Bu/Ac 152.8 -- + 2.5 Production Bil Bu 13.1 -- + 23.9
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Corn Objective Yield RegionDerived Grain Weight vs Ears per Acre
Aug 0706
04
020301
00
94
9998
9697
95
93
9205
0.24
0.26
0.28
0.30
0.32
0.34
0.36
0.38
Ears Per Acre
Lbs/Ear
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Corn for Grain Yields 2007Bushels and Change From Previous Year
65-7
153#7
1707
150-6
80-65
1153
17815
157NC
18014
13217 120
-26
150#10
90-52
111-36
156-5
12515
137-1
168#16
112-17
185#NC
123-6
94-38
12514
143-16
13530
110-12
100-10
U.S. 152.83.7
# Record HighNC = No Change
11720
95-30
142#21
80-40
210#NC
1452
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*
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2007
2007
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Model Forecast:Model Forecast: $3.11/bu$3.11/bu. U.S.. U.S. ’ ’07-08 & 07-08 & $3.20$3.20 for ’08-09for ’08-09
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Proj. Proj.
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Ethanol Economics – new plants Ethanol Economics – new plants U. of Minn. 2005 costsU. of Minn. 2005 costs
• $0.10/gal. increase in ethanol price raises break-even Corn price $0.28/bu.
• $1.00/bu. rise in corn price increases cost/gal. $0.36/gal.
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Ethanol Economics – new plantsEthanol Economics – new plants
• Ethanol prod’n cost $1.30/gal. (Univ. of Minnesota- @$2/bu. corn -- 2005)
• July 24,’07 Iowa ethanol price: $2.17/gal.• Recent margin: $0.62/gal. (40%) Drops to 20%@
corn price of about $3.55/bu. in IA -- up 32% from July 24 price
• Note: “Drop-out” corn price for existing plants is much higher
• Other variables: DDGS price, Natural Gas • Note: Plant construction costs have risen sharply since 2005
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Source of data: USDA, NASS
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Illinois Corn Yields Drought Tolerant?
2004 2005• NW 184 140• NE 174 129 • WEST 192 141• E.SE. 175 139 • SW 158 133• SE 158 130
% chg.
-24
-26
-27
-21
-16
-18
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Implications for U.S. and World Livestock, Poultry & Food Costs
• U.S. supplies 2/3 of world corn exports, 20-25% of wheat & 35-40% of cotton exports
• Cost of livestock & poultry feed will increase
• Large increase in variability of feed & food costs
• Food aid impacts?• Accelerated ag expansion into areas with
fragile eco systems • Shift livestock industries from U.S. to South
America? • Rural employment implications in U.S.
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What Could Change Prospects of Tightening Global Grain Supply?
• Accelerated corn yield increases• Crude oil price collapse• Early break-through in economical
cellulose conversion• U.S.Ethanol import tax removed – longer
term impacts• U.S. $0.51 blending credit reduced or
made variable• Declining global livestock feeding
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Need for Both Ethanol and Animal Agriculture
• 100 million gallon ethanol plant– 37 million bushels of corn– 80 workers directly employed
• 37 million bu corn Direct jobsFarrow-finish 800Or Wean-finish 242Or Beef feedlot 278
Source: Dr. John Lawrence, Head of ISU Beef CenterSource: Dr. John Lawrence, Head of ISU Beef Center
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http://www.econ.iastate.edu/faculty/wisner/
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...and justice for allThe U.S. Department of Agriculture (USDA) prohibits discrimination in all its programs and activities on the basis of race, color, national origin, gender, religion, age, disability, political beliefs, sexual orientation, and marital or family status. (Not all prohibited bases apply to all programs.) Many materials can be made available in alternative formats for ADA clients. To file a complaint of discrimination, write USDA, Office of Civil Rights, Room 326-W, Whitten Building, 14th and Independence Avenue, SW, Washington, DC 20250-9410 or call 202-720-5964.
Issued in furtherance of Cooperative Extension work, Acts of May 8 and June 30, 1914, in cooperation with the U.S. Department of Agriculture. Jack M. Payne, director, Cooperative Extension Service, Iowa State University of Science and Technology, Ames, Iowa.