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Ron Plain, Ph.D. D. Howard Doane Professor Dept of Agricultural Economics

Is the Biofuels Tank Half-Full or Half-Empty? National Farm Business Management Conference June 15, 2009 St Louis, MO. Ron Plain, Ph.D. D. Howard Doane Professor Dept of Agricultural Economics University of Missouri-Columbia http://web.missouri.edu/~rplain. Basics of Ethanol Production.

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Ron Plain, Ph.D. D. Howard Doane Professor Dept of Agricultural Economics

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  1. Is the Biofuels Tank Half-Full or Half-Empty?National Farm Business Management ConferenceJune 15, 2009 St Louis, MO Ron Plain, Ph.D. D. Howard Doane Professor Dept of Agricultural Economics University of Missouri-Columbia http://web.missouri.edu/~rplain

  2. Basics of Ethanol Production Ethanol is an alcohol made by fermenting grain and other carbohydrates This is an old process which traditionally has been used to produce ethanol for use as a beverage 97% of U.S. ethanol is made from corn Rest: milo, wheat, brewery waste, whey, etc

  3. water A bushel of corn will produce ~2.8 gallons of ethanol, 17 lbs of CO2 and 17 lbs of DDGS

  4. Laddonia Ethanol Plant

  5. Ethanol Plants Were Very Profitable In 2006, U.S. plants produced ethanol for about $1.34 per gallon. The average price of ethanol was about $2.58 per gallon.

  6. Ethanol Capacity Growth Source: Renewable Fuel Association website http://www.ethanolrfa.org/industry/statistics/#B

  7. Formulation of Alcohols H O H-C-H H Methanol CH3OH 62,800 BTU H O H-C-H H-C-H H Ethanol C2H5OH 84,400 BTU H O H-C-H H-C-H H-C-H H Propanol C3H7OH 100,000 BTU H O H-C-H H-C-H H-C-H H-C-H H Butanol C4H9OH 110,000 BTU Gasoline is mostly C8H18 Gasoline has 125,000 BTU/gallon

  8. Biofuels Policy

  9. Spot Crude Oil Prices 1995-2009WTI, Monthly Average Price, Cushing, Oklahoma Source: U.S. Energy Information Administration

  10. U.S. Retail Gasoline Prices,All Grades, All Formulations, 1996-2009 Source: U.S. Energy Information Administration

  11. Energy Sources

  12. Ethanol Production, 1980-08 Source: Renewable Fuels Association

  13. 2007 Renewable Fuels Mandate

  14. Daily Ethanol Production, 2006-09 2009 mandated use: avg 685,000 barrels/day

  15. Ethanol Production, 1990-2016 mandated use actual production Beginning in 2015, the U.S. will annually use more corn to make ethanol than the U.S. produced in any year before 1971

  16. Weekly U.S. Gasoline Prices, 2007-09 Source: U.S. Energy Information Administration

  17. Ethanol-Gasoline Price Relationship Source: Ron Plain

  18. Weekly Iowa Ethanol Prices, 2007-09 Livestock Marketing Information Center

  19. Weekly Gasoline & Ethanol Prices, Dollars Per Gallon, 2007-09 Source: U.S. Energy Information Administration

  20. Ethanol-Corn Price Relationship Source: Ron Plain

  21. Source: LMIC

  22. Weekly Corn & Ethanol Prices, 2007-09 Source: LMIC

  23. Weekly Gasoline & Corn Prices, 2007- 09 Source: U.S. Energy Information Administration

  24. Corn futures Crude oil futures

  25. Impact on feed prices

  26. Corn Milled for Ethanol Forecast % corn for ethanol: 2000-01: 6% 2005-06: 14% 2007-08: 23% 2008-09: 31% 2009-10: 34%

  27. Source: LMIC

  28. Weekly Corn & Soybean Meal Prices, 2006-09 Source: LMIC

  29. Livestock Marketing Information Center

  30. Monthly Corn & Alfalfa Prices, 2007-08 Livestock Marketing Information Center

  31. Northwest Iowa Prices, 2006-09 Source: LMIC

  32. DDGS Price as % of Corn Price, Northwest Iowa, 2006-09 Source: LMIC

  33. WDGS Price as % of DDGS Price, Northwest Iowa, 2006-08 Source: LMIC

  34. Impact on crop acres

  35. Million Acres Planted by Crop

  36. Million Acres Planted by Crop

  37. More planted acres drives up: • Seed prices • Fertilizer prices • Equipment prices • Land prices

  38. U.S. Farmland Values, 1950-2008 USDA/NASS

  39. Impact on livestock

  40. U.S. Corn Usage 2000 crop 2007 crop

  41. U.S. Feeding of Corn, 2005-06 Source: PRX ProExporter Network

  42. Cost of Slaughter Hog ProductionIowa State University Calculations, 1987-2009 Source: John Lawrence, Iowa State University

  43. Breakeven Hog Price & U.S. Corn PriceIowa State University Calculations, 1990-2008

  44. Hog Price & Cost, 1996-2008 2008 hog prices were $2.60 above the 13 year average 2008 production cost was $13.85 above the 13 year average

  45. Source: LMIC

  46. Source: LMIC

  47. March 2008 Corn Futures A dime increase in the price of corn reduces the value of feeder cattle by $6-9 per head January 2008 Feeder Cattle Futures

  48. Forecast Change in Meat Production --Percent Change-- Type 2007-08 2008-09 Pork +6.40% -2.45% Beef +0.53% -0.46% Chicken +2.07% -3.88% Turkey +4.94% -7.14% All Meats +2.90% -2.85% Source: USDA/OCE WASDE, April 2009

  49. Impact on Food Prices

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