View
213
Download
0
Category
Preview:
Citation preview
Dr. Robert Wisner: Grain Outlook Dr. Robert Wisner: Grain Outlook 3/15/063/15/06
Iowa State University AgMarketing Resource CenterAgMarketing Resource Center
Biofuels & Global Agriculture3/25/08
Dr. Robert Wisner, University Professor & BioFuels Economist
Recent Positive Developments in Recent Positive Developments in Biofuels DemandBiofuels Demand
• 2007 Energy Bill & mandates & a mechanism for implementation
• New Union Pacific rapid ethanol train receiving & unloading facility in Dallas
• North Iowa ethanol shipping facility• Opening of substantial ethanol market in
Florida and movement toward opening other southeast markets
• California state government commitment to reduce green-house gas emissions
• Higher gasoline prices?
Bio-Fuels: A Global Development
Driving Forces: –High crude petroleum prices–Concern over green-house gas Emissions
–Government policies–Energy security
Corn-ethanol only partial solution to energy challenges
Other feedstocks needed•Municipal wastes•Animal agriculture wastes•Forest product wastes•New crops
New automotive technology•Hybrid gas/electric vehicles•New engine & vehicle designs•Hydrogen fuels & fuel cells
Diversification of energy sourcesIncentives for increased mass transportation Wind power use increasing
Key Determinants of Grain-Based Biofuels Industry Size
•Crude Petroleum Price
•Grain & Oil Crop Prices Needed for Grain & Oil Crop Prices Needed for Increased Area & ProductionIncreased Area & Production
•Crop Inputs Availability & Cost
•Government Mandates
West Texas Intermediate Crude Oil
0
10
20
30
40
50
60
70
80
90
100
1960 1965 1970 1975 1980 1985 1990 1995 2000 2005
dol
lars
/bar
rel (monthly average price)
U.S. 2007 Energy Bill
• U.S. 2007 renewable fuels production: 4.7 bil. gallons
• For 2008: Requires U.S. renewable fuels production at 9 bil. gallons
• For 2009: 11.1 bil. gallons
• For 2015: 15 bil. gallons corn-based ethanol (57 bil. liters)
• For 2009: 500 mil. gallons of biodiesel (1 bil. For 2009: 500 mil. gallons of biodiesel (1 bil. gallons for 2015)gallons for 2015)
Source: Dr. Terry Francel, American Farm Bureau Federation & U.S. Energy Dept.
Cautions in 2008-09 Grain Markets
1.1. Fund TradersFund Traders
2. Bio-diesel economics not good, no mandate until 2009.
2.2. Domestic user returns tighten Domestic user returns tighten with higher corn prices – livestock with higher corn prices – livestock & fuel& fuel
Ethanol, demand growth & food inflation shifting China from to corn exporter to importer?
41 Countries Encourage Biofuels
U.S. expansion Continuing
Changes in U.S. Ethanol Plants, 7/27/07 to 3/14/08 (From DTN)
7/27/07 11/6/07 1/8/081/8/08 3/14/083/14/08
• U.S. Opr. Plants 134 139 163 171
• Under Const. 89 91 81 74
• 35 under construction a year or more
• Planned plants 329 343 336 341
• Total 552 572 580 586
Recent Start-ups & Soon to be on Line Recent Start-ups & Soon to be on Line U.S. Ethanol PlantsU.S. Ethanol Plants
Location Mil. Gal. Cap. Date• Pikely, CA 40 AprilPikely, CA 40 April • Lima, Ohio 54 MarchLima, Ohio 54 March• Greenville, OH 110 March Greenville, OH 110 March • Hennepin, IL 100 April Hennepin, IL 100 April • Cambria, WI 40 AprilCambria, WI 40 April• Coshocton, OH 60 MarchCoshocton, OH 60 March• St. Ansgar, IA 100 MarchSt. Ansgar, IA 100 March• Monona, IA 100 April Monona, IA 100 April • Alexanderia, IN 65 Mid-AprilAlexanderia, IN 65 Mid-April• Volney, NY Volney, NY 41 41 May-Jn May-Jn
Total 710 Total 710
2007-08 U.S. corn supplies 2007-08 U.S. corn supplies adequate to meet demandadequate to meet demand
• Crop up 24% -- 20% increase in corn hectares• But at expense of:
– 16% decline in soybean planted area16% decline in soybean planted area– 29% decline in cotton area29% decline in cotton area– 8% decline in non-durum spring wheat8% decline in non-durum spring wheat– Declines in minor cropsDeclines in minor crops
• Soybean supplies tighten substantially, increased Soybean supplies tighten substantially, increased plantings needed in 2008plantings needed in 2008
• More U.S. corn will be needed in 2009,More U.S. corn will be needed in 2009,
2010, 20112010, 2011
Corn Used in Ethanol Production, and Co-products Produced
0
20
40
60
80
100
120
140
160
1993 1995 1997 1999 2001 2003 2005 2007 2009 2011 2013
Mil.
To
ns
Corn Processed
Net Bu. After Co-Product Credits
Historical & Needed U.S. Corn Yield Deviation Historical & Needed U.S. Corn Yield Deviation Needed Needed From TrendFrom Trend
0.7
0.0
-10.2
0.0
16.2
1.8
0.9
0.9
3.3
3.8
7.5
11.8
13.4
14.0
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
Other Considerations:
Sharp increase in marginal
Corn acres
Very tight fertilizer supplies
Corn-on-corn yield drag
Low C-o-C yields in bad weather
U.S. Planted Acreage of Major Grains, Oilseeds, and Cotton
0
40
80
120
160
200
240
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
Mil
. A
cre
s
AllBarleyoatsCottonSorghumwheatSBcorn
255.6 239.9 244.6
International Impacts
• U.S. ethanol plants under construction to use 2.0 bil. bu. of corn (almost doubling use)– Over 3 times the volume of Japan imports
of U.S. corn– 105% of 2007 EU corn crop– 54% of global corn exports
• Higher food costs ahead, U.S. & globally• Major risk-management challenges in Ag. & bioenergy
Total 11,693 mil. Bu.
Figure 3.
Iowa corn processing & ethanol plants, current & planned, 10/26/06
63
Sac
Linn
Lee
Ida
Tama
Clay Kosuth
Jasper
Lyon
Page
StoryrJones
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
HamiltonGrundy
Buchanan
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*
**
*
*
*
*
* **
*
**
*
**
*
*
*
**
*
*
*
*
*
*
*
*
**
**
*
**
*
*
**
*
* * **
Sac
Linn
Lee
Ida
Tama
Clay Kosuth
Jasper
Lyon
Page
StoryrJones
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
HamiltonGrundy
Buchanan
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*
**
*
*
*
*
* **
*
**
*
**
*
*
*
**
*
*
*
*
*
*
*
*
**
**
*
**
*
*
**
*
* * **
*
Sac
Linn
Lee
Ida
Tama
Clay Kosuth
Jasper
Lyon
Page
StoryrJones
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
HamiltonGrundy
Buchanan
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*
**
*
*
*
*
* **
*
**
*
**
*
*
*
**
*
*
*
*
*
*
*
*
**
**
*
**
*
*
**
*
* * **
Sac
Linn
Lee
Ida
Tama
Clay Kosuth
Jasper
Lyon
Page
StoryrJones
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
HamiltonGrundy
Buchanan
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*
**
*
*
*
*
* **
*
**
*
**
*
*
*
**
*
*
*
*
*
*
*
*
**
**
*
**
*
*
**
*
* * **
*
*
*
* **
*
*
*
*
66 Planned + current in Iowa
11 Just across the borders
*
*
**
Figure 1.
*
*
*
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
Figure 2.
Take-Home Points: IITake-Home Points: II
• Global grain-food-livestock adjustments ahead
• Ethanol prod’n will expand until it meets mandates or is unprofitable
• Grain markets will be explosive with U.S. & foreign weather problems
• ISU Climatologist Elwynn Taylor sees 70% probability of below trend ‘08 U.S. corn yield
• Corn & SB basis likely stronger, May-August
• Options Mkts. more important than in the past
• Options look expensive, but out-of-money strike prices can provide upward price flexibility
http://www.econ.iastate.edu/faculty/wisner/
Thanks! Questions?
Recommended