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Impact of Biodiesel on Iowa Agriculture Iowa Renewable Fuels Summit January 29-30, 2013 John M. Urbanchuk Technical Director – Environmental Economics. Who we are.

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Who we are

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  1. Impact of Biodiesel on Iowa Agriculture Iowa Renewable Fuels SummitJanuary 29-30, 2013John M. UrbanchukTechnical Director – Environmental Economics

  2. Who we are • Cardno ENTRIX is a professional environmental consulting company specializing in water resources management, environmental risk management, natural resource economics, natural resources management, and facility permitting & compliance. • Our staff of more than 1,600 includes biologists, chemists, geologists, oceanographers, toxicologists, meteorologists, economists, and environmental, chemical, and civil engineers. • Headquartered in Houston, we have more than 40 offices in the U.S., Canada, Ecuador, Colombia and Peru. 2

  3. Objective of Study • Identify and quantify the impact of the Iowa biodiesel industry on the Iowa agricultural economy. • Estimate the impact of no biodiesel industry on Iowa corn, soybean, and livestock producers.

  4. Biodiesel Feedstocks - 2012 Source: USDA/IRFA

  5. Iowa biodiesel production increased 29% in 2012 Impact on Commodity Prices

  6. Biodiesel Impact on Corn Oil • 33 of Iowa’s 35 dry mill ethanol plants extract approximately 656 million pounds of industrial grade corn oil. • 70% is used as a biodiesel feedstock and is priced at 80% of crude soybean oil. • Biodiesel share accounts for as much as 6.6 cents per gallon of net revenue for a dry mill ethanol plant increasing profitability by 55 percent.

  7. Impact of Industrial Corn Oil on a 100 MGY Iowa Dry Mill Ethanol Plant

  8. Biodiesel Increases the Value of Beef and Hog Byproducts • 793 million pounds of beef tallow, white grease and poultry fat were used as a biodiesel feedstock in the first 9 months of 2012. • Without an Iowa biodiesel industry: • Tallow, lard, and white grease prices would be about 36 percent lower than actual. • Byproduct values for cattle would be $12.21 per head lower than current values • Hog byproduct values would be $1.11 per head lower. • These values are reflected in market prices for cattle and hogs. Without biodiesel, prices would be lower.

  9. Impact on Iowa farmers • Impact of biodiesel was evaluated for three farm scenarios: • Row crop farmer with 800 acres split 50/50 between corn and soybeans. • Farmer feeder with 1,200 acres split 50/50 between corn and soybeans who feeds 3,500 cattle per year. • Farmer feeder with 1,200 acres split 50/50 between corn and soybeans that finishes 16,000 hogs per year

  10. Methodology • Used Iowa Extension Service crop and livestock budgets as a starting point. • Evaluated 2011/12 marketing year for crops, CY 2012 for cattle and hogs. • Imposed “no biodiesel” prices for crops, livestock, and by-product values. • Assumed no change in area planted and yields or livestock numbers. • Focused on change in net farm income for each operation.

  11. Iowa biodiesel production increased 29% in 2012 Impact on Commodity Prices

  12. Row crop farmer would lose $44,078 without biodiesel

  13. Farmer feeder with corn, soybeans and 3,500 head of cattle would lose $121,251 without biodiesel • Loss of $66,177 from 600 acres each of corn and soybeans. • Modestly lower feed costs without biodiesel • Higher DDGS prices moderate lower corn prices • Revenue from marketing steers is reduced by • Lower finished steer price • Reduced by-product values • Loss of $55,134 from fed cattle operations.

  14. Farmer feeder with corn, soybeans who markets 16,000 hogs would lose $130,851 without biodiesel • Loss of $66,177 from 600 acres each of corn and soybeans. • Modestly lower feed costs without biodiesel • Higher SBM and DDGS prices moderate lower corn prices • Revenue from marketing hogs is reduced by • Lower market hog price • Reduced by-product values • Loss of $64,734 from hog operations

  15. Conclusion • Increased demand for biodiesel feedstocks supports higher prices for corn, soybeans, soybean and industrial grade corn oil, cattle and hogs. • Increased demand for biodiesel also increases the value of cattle and hog byproducts which are reflected in market prices. • Without the demand for fats and oils from the biodiesel industry, revenue for row crop farmers and livestock producers would decline and the entire Iowa ag sector would suffer. 15

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