Impacts of Increased Local Processing: Update on Ethanol and Soybean Operations

1. Impacts of Increased Local Processing:Update on Ethanol and Soybean Operations Iowa Grain Quality Initiative Iowa State University January 11, 2008 Surveys conducted by: ISU Extension Value Added Agriculture Program Sponsored by: ISU Extension Iowa Grain Quality Initiative

2. Project objectives • Maintain a data set to define the scope and variation involved in the current industry activities surrounding grain origination methods, impact on grain storage and co-product handling/marketing. • Measure impacts of growth on the ethanol and soy processing industries and on their input supply chains.

3. Operating plants 137 Plants in USA in 26 states 7.59 BGY 27 Plants in Iowa 2 BGY Construction/expansion 68 Plants in USA 6.5 BGY 18 Plants in Iowa 2 BGY Planned Approximately 15 BGY USA 2.5 BGY in Iowa

4. Plants operating in 2006 • Average production • 60 mgy • Range • 20 mgy – 120 mgy • Plants produce at 105-110% above rated capacity • Most have outbound rail access • Few have inbound rail access

5. Plants currently under construction • Average production • 85 mgy • Range 35 – 200 mgy • Expansions may double original plant size

6. 2006 vs. 2007 • Plants are larger • Fractionation • Higher corn prices compared with ethanol prices • Distillers grains became larger percentage of income

7. Iowa Ethanol Production and Corn Usage *Operating at rated capacity. **Plants in bordering counties of other states with 50% use assigned to Iowa corn.

8. Distillers Grains production • In 2007, the USA is expected to produce 16 million tons of DDGS • 90% is sold in US as livestock feed • Export customers include: • Mexico • Taiwan • Japan • China • Morocco • Costa Rica • EU (approved GM crops in 2006 production; not ’07) Feeds Use 75% Cattle 20% Swine 5% Poultry and other (Meat goats, too!)

9. DDGS Current issues • Need a better way to get the product to the customer – • Flowability still an issue • Marketing groups being formed for larger buyers • Product not standardized, but… • A biological process lends itself to variability. • No other feed ingredient has mandated standard.

10. DDGS Quality issues • Color is the big tip-off with export customers. • Variability in nutrient content • Mycotoxins • Digestibility (particularly protein and amino acid digestibility due to Maillard reaction)

11. Soybean Processing Survey • Survey asked for: • Processing capacity • Preferred soybean quality • Types of products • Amount of storage • Contacted 31 soybean processing plants and 14 biodiesel refineries; 11 responded

12. Soybean Processing Solvent crush plants Expeller plants Mills/Flaking plants Soyfood Some plants more capable of handling Indentity Preserved and Organic Soybeans

13. Crush and Expeller plants • Crush (solvent) plants (13) • Capacity 27,000 – 100,000+ bu/d • Oil refining capabilities, meal, hulls • Capacity for 98.5% of Iowa’s 2007 crop • Expeller plants (11) • Range 600 - 33,000 bu/d • Better able to handle specialty beans • Meal and oil differ from solvent products

14. Milling, Soyfoods • Whole beans, usually Identity Preserved • Finished foods and ingredients • May purchase soybeans from sorting/cleaning operations

15. Source: Google 2007

16. Iowa Soybean Processing Capacity

17. Iowa Biodiesel Production n mgy % 2007 SB oil Operation 14 318 65.4% Construction 2 35 7.2% Subtotal 17 353 72.6% Planned 14 485 99.6% Total 31 838 172.2%

18. What Could Corn Oil Add? Grain Yield Oil Yield (bu/acre) (lb/acre) Soybeans 52.0 567 Corn 175.0 350 2007 Avg. Yields 10.9 lb oil/bu soybeans 2.0 lb oil/bu corn Assume 7.8 lb/gal oil and 80% biodiesel yield 8.36 mil ac soybeans; 13.95 mil ac corn

19. What Could Corn Oil Add? Max. Oil Biodiesel (MM lbs) (MM gal) Soybeans 4743.9 486.6 Corn 4882.6 500.8 9626.5987.4 Operating + Construction 353 35.8% Planned 485 49.1% 838 84.9% Assume 7.8 lb/gal oil and 80% biodiesel yield 8.36 mil ac soybeans; 13.95 mil ac corn

20. What About the Acreage Split? Corn/SB Max Biodiesel (billion bu) (million gal) 2006 2.05/0.51 980.7 2007 2.44/0.44 987.3

21. What About the Acreage Split? DDGS SBM Protein (mln ton) (mln ton) (mln ton) 2006 17.43 11.25 9.9 2007 20.75 9.77 10.1 Issues: Protein quality (amino acids) Energy content (starch, oil)

22. Concerns for the biodiesel industry • Adequate supply • Speculators driving prices higher • Markets for glycerin

23. Concerns for the organic/IP processors • Challenge to increase acres (or maintain) • Erosion of non-GMO germplasm • Training needs for new growers • Imports from China will take over markets • Group certification of farmers in China

24. Acknowledgements • Iowa Grain Quality Initiative www.iowagrain.org Special thanks to: Robert Mortensen, Value Added Agriculture Program Andy Larson, ISU Sustainable Agriculture Program

25. Contact information Iowa State University Extension Value Added Agriculture Program www.iavaap.org or www.agmrc.org Connie Hardy chardy@iastate.edu Ray Hansen hansenr@iastate.edu Iowa Grain Quality Initiative www.iowagrain.org Howard Shepherd howard@iastate.edu Charles Hurburgh tatry@iastate.edu