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Let’s Talk About Ethanol

Let’s Talk About Ethanol. Chad Hart Center for Agricultural and Rural Development Iowa State University E-mail: chart@iastate.edu October 2, 2007 ISU Farm Management Field Specialist In-Service Program Ames, Iowa. Ethanol Explosion. Source: Renewable Fuels Association.

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Let’s Talk About Ethanol

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  1. Let’s Talk About Ethanol Chad Hart Center for Agricultural and Rural Development Iowa State University E-mail: chart@iastate.edu October 2, 2007 ISU Farm Management Field Specialist In-Service Program Ames, Iowa

  2. Ethanol Explosion Source: Renewable Fuels Association

  3. Renewable Fuels Standard Source: Renewable Fuels Association

  4. Ethanol Industry Snapshots Source: Renewable Fuels Association

  5. Ethanol – State by State

  6. Historical Corn Utilization

  7. 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

  8. Ethanol – State by State

  9. Projected Corn Utilization

  10. Oil Futures As Of 10/1/2007

  11. Nearby Corn Futures

  12. Corn Futures As Of 10/1/2007

  13. Historical Ethanol Margins

  14. Projected Ethanol Margins

  15. Comparing Futures Prices

  16. 10 Observations about Ethanol • 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) • Gasoline prices are likely to remain high enough to support ethanol

  17. 10 Observations about Ethanol • Ethanol margins can remain positive over a wide corn price range • Corn prices are likely to remain higher than usual • Given positive margins, ethanol plants will be competitive for corn at higher prices

  18. 10 Observations about Ethanol • To maintain all corn usage demands, the U.S. will need to dramatically expand corn acreage • Other countries will response to higher corn prices as well • With heightened demand and thin stocks, the corn market will be more volatile

  19. 10 Observations about Ethanol • Cellulosic ethanol has tremendous promise, but it will be several years before cellulosic ethanol truly impacts the energy markets • The merging of the energy and agricultural sectors will force substantial changes in both sectors

  20. Basis in 2005

  21. Basis in 2006

  22. Basis in 2007

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