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BiodieselBiodieselThe Solution or a Disaster?The Solution or a Disaster?
John BaizeJohn BaizeJohn C. Baize and AssociatesJohn C. Baize and Associates
Rising Petroleum Rising Petroleum Prices The Driver for Prices The Driver for BiofuelsBiofuels
Biodiesel BasicsBiodiesel Basics
The basic ingredients of biodiesel are a The basic ingredients of biodiesel are a refined fat or oil (~87%), methanol refined fat or oil (~87%), methanol (~12%), and a catalyst (1%).(~12%), and a catalyst (1%).
About 7.5 pounds of oil/fat are required About 7.5 pounds of oil/fat are required for each gallon of biodiesel producedfor each gallon of biodiesel produced
Process creates biodiesel (86%), glycerin Process creates biodiesel (86%), glycerin (8%), alcohol (4%) and fertilizer (1%).(8%), alcohol (4%) and fertilizer (1%).
Biodiesel has about the same energy content as Biodiesel has about the same energy content as petrodieselpetrodiesel
Thermal DepolymerizationThermal Depolymerization
Tyson Foods and ConocoPhillips have Tyson Foods and ConocoPhillips have announced plans to make up to 175 announced plans to make up to 175 million gallons of “green diesel” with million gallons of “green diesel” with thermal depolymerization processthermal depolymerization process
Animal fats will be blended with crude oil Animal fats will be blended with crude oil and processed in petroleum refineriesand processed in petroleum refineries
Resulting product will qualify for Resulting product will qualify for biodiesel subsidy and can be transported biodiesel subsidy and can be transported by pipelinesby pipelines
U.S. Biodiesel U.S. Biodiesel IncentivesIncentives Energy act of 2005 provides $1/gallon Energy act of 2005 provides $1/gallon
federal tax incentive (payable to federal tax incentive (payable to blenders) for biodiesel made from virgin blenders) for biodiesel made from virgin vegetable oils and animal fats (1¢ per %)vegetable oils and animal fats (1¢ per %)
Tax incentive for biodiesel made from Tax incentive for biodiesel made from inedible animal fats and used vegetable inedible animal fats and used vegetable oils is 50¢/gallon (0.5¢ per %)oils is 50¢/gallon (0.5¢ per %)
The tax incentive for using virgin vegoils The tax incentive for using virgin vegoils to make biodiesel is about $302/mt or to make biodiesel is about $302/mt or 13.3¢/pound.13.3¢/pound.
This equates to about $42/barrel.This equates to about $42/barrel.
Subsidized biodiesel Subsidized biodiesel Can Be ExportedCan Be Exported The biodiesel blenders credit is collected The biodiesel blenders credit is collected
when biodiesel is blended.when biodiesel is blended. Some firms are blending 0.1% diesel with Some firms are blending 0.1% diesel with
pure biodiesel, collecting 99.9 pure biodiesel, collecting 99.9 cents/gallon, and then exporting the cents/gallon, and then exporting the biodiesel to Europe.biodiesel to Europe.
Some foreign biodiesel is coming here Some foreign biodiesel is coming here where it is imported, blended with 0.1% where it is imported, blended with 0.1% diesel, blenders credit is collected, and diesel, blenders credit is collected, and then re-exported to Europe. then re-exported to Europe.
Europe’s biodiesel sector very upset with Europe’s biodiesel sector very upset with this “splash and dash” practicethis “splash and dash” practice
Estimated U.S. Biodiesel Estimated U.S. Biodiesel ProductionProduction1999 – 2005 and Estimate for 20061999 – 2005 and Estimate for 2006
0.5 2 515 20 25
75
180
020406080
100120140160180200
1999 2000 2001 2002 2003 2004 2005 2006 F.
Celendar Year
Mill
ion
Ga
llon
s
Source: National Biodiesel Board
CY 2006 production equal to about billion pounds
USA USA Soybean Oil ConsumptionSoybean Oil Consumption
0
1
2
3
4
5
6
7
8
9
Marketing Year Beginning
MM
T
Biodiesel Likely to Drive Up Demand in Future
U.S. Industrial Use of VegoilsU.S. Industrial Use of Vegoils2000/01 – 2005/06 and Forecast for 2006/072000/01 – 2005/06 and Forecast for 2006/07
364 412
412
420
412 472
481
0100200300400500600
2000
/ 200
1
2001
/ 200
2
2002
/ 200
3
2003
/ 200
4
2004
/ 200
5
2005
/ 200
6
2006
/ 200
7
Marketing Year
MT 0
00
Demand surge just beginning
Rapidly Rising Rapidly Rising CapacityCapacity National Biodiesel Board (NBB) indicated National Biodiesel Board (NBB) indicated
In January that 92 biodiesel plants with In January that 92 biodiesel plants with an annual capacity of 738 million gallons an annual capacity of 738 million gallons are operationalare operational
Some use recycled oils/fats and a few Some use recycled oils/fats and a few others will use animal fat. However, others will use animal fat. However, most use vegoil, primarily soyoil. most use vegoil, primarily soyoil.
It would take 3.65 billion pounds (1.66 It would take 3.65 billion pounds (1.66 mmt) of oil/fat to supply all of the mmt) of oil/fat to supply all of the existing plants at full capacity each year. existing plants at full capacity each year.
Capacity Likely To be Capacity Likely To be Much Greater in 2008Much Greater in 2008 NBB indicates 47 biodiesel plants either NBB indicates 47 biodiesel plants either
are being built or expanded with an are being built or expanded with an additional annual capacity of 1.06 billion additional annual capacity of 1.06 billion gallonsgallons
It would take 7.97 billion pounds (3.6 It would take 7.97 billion pounds (3.6 mmt) of oils/fats to produce that much mmt) of oils/fats to produce that much biodiesel. biodiesel.
That is equal to 28% of total U.S. vegoil That is equal to 28% of total U.S. vegoil demand in 2005/06. demand in 2005/06.
It also is equal to the oil in It also is equal to the oil in 705705 million bushels of soybeans. of soybeans.
Potential Installed Biodiesel Potential Installed Biodiesel CapacityCapacity
If all of the planned capacity is If all of the planned capacity is built the U.S. Will wind up with an built the U.S. Will wind up with an annual capacity of 1.8 billion annual capacity of 1.8 billion gallonsgallons
It would take 13.5 billion pounds It would take 13.5 billion pounds (6.1 mmt) of oils and fats to (6.1 mmt) of oils and fats to operate it at full capacityoperate it at full capacity
That’s equal to 52% of forecasted That’s equal to 52% of forecasted U.S. vegoil use this yearU.S. vegoil use this year
U.S. Already Has Large U.S. Already Has Large and Growing Vegoil and Growing Vegoil DeficitDeficit
-2,000-1,500-1,000
-5000
5001,0001,5002,0002,5003,000
2000/ 01 2001/ 02 2002/ 03 2003/ 04 2004/ 05 2005/ 06 2006/ 07
Imports Exports Deficit
EU-25EU-25Biodiesel ProductionBiodiesel Production
313422
568
936
1,617
0200400600800
10001200140016001800
2002 2003 2004 2005 Est. 2006 F.
Marketing Year
Million G
allons
Source: European Biodiesel Board, Oil World
European UnionEuropean UnionIndustrial Use of VegoilsIndustrial Use of Vegoils
1.9 2.02.5
3.3
4.5
6.3
7.8
0
2
4
6
8
10
2000 2001 2002 2003 2004 2005 2006
Marketing Year Beginning
MM
T
European UnionEuropean UnionVegoils Imports, Exports and DeficitVegoils Imports, Exports and Deficit
-3.00 -3.57 -3.85 -4.33-5.50
-7.04-7.62
-10-8-6-4-202468
10
2000/ 01 2001/ 02 2002/ 03 2003/ 04 2004/ 05 2005/ 06 2006/ 07MM
T
Imports Exports Deficit
Spain’s Planned Biodiesel Spain’s Planned Biodiesel ExpansionExpansion
Press reports indicate 23 biodiesel plants are Press reports indicate 23 biodiesel plants are scheduled to be built in Spain by end of 2008scheduled to be built in Spain by end of 2008
The announced combined annual capacity of The announced combined annual capacity of the facilities is the facilities is 2.6 mmt2.6 mmt
That would require more oils/fats than Spain That would require more oils/fats than Spain consumed for all uses in 2005 (2.55 mmt)consumed for all uses in 2005 (2.55 mmt)
Spain already is a net importer of over 1.2 mmt Spain already is a net importer of over 1.2 mmt of oils/fats and has limited capability to expand of oils/fats and has limited capability to expand its oilseed production, particularly rapeseedits oilseed production, particularly rapeseed
The volume of oils/fats Spain will require to The volume of oils/fats Spain will require to operate the plants at full capacity exceeds operate the plants at full capacity exceeds Brazil’s soyoil exportsBrazil’s soyoil exports
French Biodiesel French Biodiesel SectorSector France currently has 5 plants with capacity of France currently has 5 plants with capacity of
700,000 mt700,000 mt Two plants come on stream in 2007 with Two plants come on stream in 2007 with
capacity of 500,000 mtcapacity of 500,000 mt Seven plants have been announced to begin Seven plants have been announced to begin
operations in 2008 with a capacity of 1.135 operations in 2008 with a capacity of 1.135 mmt of capacitymmt of capacity
By the end of 2008 French biodiesel capacity By the end of 2008 French biodiesel capacity will bewill be about 2.335 mmt about 2.335 mmt
France already is a net importer of oils and France already is a net importer of oils and fatsfats
Brazil Also Has Major Biodiesel Brazil Also Has Major Biodiesel ProgramProgram
Brazil plans to replace 5% of diesel Brazil plans to replace 5% of diesel usage with biodiesel by 2013 – likely usage with biodiesel by 2013 – likely to move that up to 2010.to move that up to 2010.
It would require 2.4 billion liters of It would require 2.4 billion liters of biodiesel to meet 5% goal. biodiesel to meet 5% goal.
It would take about 2.19 mmt of It would take about 2.19 mmt of vegoil to produce 2.4 billion liters of vegoil to produce 2.4 billion liters of biodiesel.biodiesel.
Brazil’s total soyoil exports in current Brazil’s total soyoil exports in current year are forecasted at 2.18 mmt. year are forecasted at 2.18 mmt.
Argentina Has Adopted Argentina Has Adopted Biodiesel MandateBiodiesel Mandate Argentina has adopted a 2% biodiesel Argentina has adopted a 2% biodiesel
mandate and will increase it to 5% in a mandate and will increase it to 5% in a couple of yearscouple of years
Argentina’s differential exports taxes Argentina’s differential exports taxes (DETS) strongly favor exports of biodiesel (DETS) strongly favor exports of biodiesel (24% export tax on vegoil, 5% export tax (24% export tax on vegoil, 5% export tax on biodiesel). The subsidy from DETS on biodiesel). The subsidy from DETS equates to about 42.5¢/gallon ($125/mt)equates to about 42.5¢/gallon ($125/mt)
Observers expect capacity to reach 1.5 – Observers expect capacity to reach 1.5 – 2.0 mmt in 2 - 3 years.2.0 mmt in 2 - 3 years.
Malaysia and Indonesia Malaysia and Indonesia Building Huge Biodiesel SectorsBuilding Huge Biodiesel Sectors
Rather than exporting palm oil to other Rather than exporting palm oil to other countries to make biodiesel, Indonesia and countries to make biodiesel, Indonesia and Malaysia are building their own biodiesel Malaysia are building their own biodiesel sector. sector.
Malaysia plans to have 4 mmt of biodiesel Malaysia plans to have 4 mmt of biodiesel capacity by end of 2008capacity by end of 2008
Indonesia likely to have equal amount of Indonesia likely to have equal amount of capacity at end of 2008. capacity at end of 2008.
They plan to export biodiesel to Europe, the They plan to export biodiesel to Europe, the U.S. and elsewhereU.S. and elsewhere
Large amounts of inexpensive palm oil is Large amounts of inexpensive palm oil is unlikely to be available for other countries to unlikely to be available for other countries to make to make biodiesel. make to make biodiesel.
Future Impact of Future Impact of Biodiesel Biodiesel Impact on global diesel supply will be Impact on global diesel supply will be
minimalminimal All of the vegoil of all types consumed in All of the vegoil of all types consumed in
the U.S. would make only enough the U.S. would make only enough biodiesel to supply 5.5% of U.S. diesel biodiesel to supply 5.5% of U.S. diesel consumption – about the same as consumption – about the same as agriculture uses.agriculture uses.
All of the world’s vegoils would only make All of the world’s vegoils would only make enough biodiesel to supply 57% of U.S. enough biodiesel to supply 57% of U.S. diesel consumptiondiesel consumption
Oil-Meal Balance in Soybean Oil-Meal Balance in Soybean CrushCrush
Typically soyoil has contributed 30% – Typically soyoil has contributed 30% – 40% of soybean crush product value. 40% of soybean crush product value.
Each 1¢/pound increase in soyoil prices Each 1¢/pound increase in soyoil prices equal to ~$4.20 increase in soyoil value equal to ~$4.20 increase in soyoil value from crushing a metric ton of soybeansfrom crushing a metric ton of soybeans
Soymeal price can drop by ~$5.40/mt Soymeal price can drop by ~$5.40/mt and maintain same crush margin and maintain same crush margin (assuming no change in soybean price) (assuming no change in soybean price) if oil price rises 1¢/pound if oil price rises 1¢/pound
If Biodiesel Increases Vegoil If Biodiesel Increases Vegoil PricesPrices
Greater demand for vegoils to produce Greater demand for vegoils to produce biodiesel is almost certain to drive vegoil prices biodiesel is almost certain to drive vegoil prices higher and increase crusher return from oilhigher and increase crusher return from oil
This will increase crush margins and cause This will increase crush margins and cause crushers to crush a greater volume assuming crushers to crush a greater volume assuming the decline in meal returns does not exceed the decline in meal returns does not exceed additional gain from vegoiladditional gain from vegoil
If soyoil prices rise because of biodiesel If soyoil prices rise because of biodiesel demand by demand by 4¢/pound4¢/pound ($88/mt) then margins ($88/mt) then margins will not fall (will not fall (assuming no change in soybean assuming no change in soybean pricesprices) unless soymeal prices fall by more than ) unless soymeal prices fall by more than $21.60/mt $21.60/mt
Biofuels to Cause Glut Biofuels to Cause Glut of Protein Mealsof Protein Meals The more ethanol that is produced from corn, The more ethanol that is produced from corn,
the more DDGs (27% Protein) that will be the more DDGs (27% Protein) that will be producedproduced
The more demand there is for vegoils for The more demand there is for vegoils for biodiesel production the more soymeal, biodiesel production the more soymeal, canola meal, and other protein meals that canola meal, and other protein meals that will be produced.will be produced.
Net result will be an excess supply of protein Net result will be an excess supply of protein meals and a likely major decline in protein meals and a likely major decline in protein meal prices.meal prices.
Some are expecting soymeal to fall below Some are expecting soymeal to fall below $135/mt$135/mt
Potentially Huge Volumes of Potentially Huge Volumes of Protein Meal Will Have To Be Protein Meal Will Have To Be ExportedExported
If an additional 1 mmt of soyoil is needed If an additional 1 mmt of soyoil is needed to supply the biodiesel sector it will mean to supply the biodiesel sector it will mean an additional 4.4 mmt of soymeal that will an additional 4.4 mmt of soymeal that will have to find a homehave to find a home
We also are likely to see large amounts of We also are likely to see large amounts of additional canola meal being produced in additional canola meal being produced in North America that will compete in feed North America that will compete in feed markets and require more exportsmarkets and require more exports
More DDGS also will need to be exported. More DDGS also will need to be exported. ProExporter predicts 19.9 mmt of soymeal ProExporter predicts 19.9 mmt of soymeal
will be exported by U.S. in 2015/16will be exported by U.S. in 2015/16
Greatest Impact on Oilseed Greatest Impact on Oilseed Crushers in Importing NationsCrushers in Importing Nations
More soybeans and other oilseeds More soybeans and other oilseeds likely to be processed in oilseed likely to be processed in oilseed producing nationsproducing nations
Oilseed meal prices will declineOilseed meal prices will decline More low-priced oilseed meals will More low-priced oilseed meals will
have to be exported by oilseed have to be exported by oilseed producing nationsproducing nations
Fewer oilseeds available to Fewer oilseeds available to importersimporters
Countries With Countries With Vulnerable Crushing Vulnerable Crushing SectorsSectors Korea – low oil and meal tariffsKorea – low oil and meal tariffs Japan – no tariff on mealJapan – no tariff on meal Mexico – zero tariffs on meal and oil Mexico – zero tariffs on meal and oil
from U.S.from U.S. European Union – no tariff on soymealEuropean Union – no tariff on soymeal Costa Rica & Trinidad Costa Rica & Trinidad ThailandThailand Middle EastMiddle East
Global Exports of Soybeans Global Exports of Soybeans Versus Exports of Soymeal and Versus Exports of Soymeal and SoyoilSoyoil
40
45
50
55
60
65
70
75
2000 2001 2002 2003 2004 2005 2006
Marketing Year Beginning
MM
T
Soybeans Soymeal + Soyoil
China has been main factor behind rising soybean exports
Trend likely to change in future.
U.S. Vegoil End Stocks To Use U.S. Vegoil End Stocks To Use RatioRatio1996/97 – 2006/071996/97 – 2006/07
9.3% 8.9% 9.2%
11.4%
15.2%
11.2%
8.3% 7.9%
10.5%
16.1%
13.7%
0%
5%
10%
15%
20%
1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006
Marketing Year Beginning
%
GlobalGlobal Vegoil End Stocks To Use Vegoil End Stocks To Use RatioRatio1996/97 – 2005/061996/97 – 2005/06
9.4% 9.0%9.6%
10.2% 10.1%9.3%
8.8%8.1%
8.8%8.0%
7.1%
0%
2%
4%
6%
8%
10%
12%
14%
1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006
Marketing Year Beginning
MT 0
00
Lowest ratio forecasted for 2006/07 since 1974/75
Global Vegoil Production & Global Vegoil Production & ConsumptionConsumption
90.092.7
95.8
101.8
111.4
118.0123.1
88.791.8
95.6100.3
108.1
115.4
121.9
80859095
100105110115120125130
2000
/ 01
2001
/ 02
2002
/ 03
2003
/ 04
2004
/ 05
2005
/ 06
2006
/ 07
MM
T
Production Consumption
Limits to Near-term Increase in Limits to Near-term Increase in Vegoil SuppliesVegoil Supplies
Brazil reduced soybean plantings this year by Brazil reduced soybean plantings this year by 6% because of low profits6% because of low profits
Argentina can increase plantings only by 3% Argentina can increase plantings only by 3% or so because of limited land availabilityor so because of limited land availability
U.S. likely to reduce soybean plantings in 2006 U.S. likely to reduce soybean plantings in 2006 by as much as 5 million acres because of high by as much as 5 million acres because of high corn and wheat pricescorn and wheat prices
It takes 5 years to develop oil palms with It takes 5 years to develop oil palms with profitable production – 8 years o full profitable production – 8 years o full productionproduction
Jatropha and castor beans currently only a Jatropha and castor beans currently only a hope, not realityhope, not reality
When Will Higher When Will Higher Prices Ration Vegoil Prices Ration Vegoil Demand?Demand? Current pace of growth in use of vegoils for Current pace of growth in use of vegoils for
biodiesel production cannot be sustained for biodiesel production cannot be sustained for long. Price will have to ration demand.long. Price will have to ration demand.
With all of the mandates and incentives With all of the mandates and incentives from governments here and abroad at what from governments here and abroad at what price will vegoil demand for biodiesel be price will vegoil demand for biodiesel be limited? 35¢? 40¢?limited? 35¢? 40¢?
Will demand for food be significantly limited Will demand for food be significantly limited before demand from biodiesel producers?before demand from biodiesel producers?
The Food Versus Fuel Debate of The Food Versus Fuel Debate of the Futurethe Future
It would take about 10.7 mmt of vegoil to It would take about 10.7 mmt of vegoil to supply 5% of U.S. annual diesel consumption. supply 5% of U.S. annual diesel consumption. That’s about 86% of India’s total vegoil That’s about 86% of India’s total vegoil consumption or about 95% of annual U.S. consumption or about 95% of annual U.S. vegoil consumption.vegoil consumption.
The European Union already is using more The European Union already is using more vegoil for biodiesel and other industrial uses vegoil for biodiesel and other industrial uses than is used annually for all purposes by than is used annually for all purposes by Indonesia, Vietnam, Thailand, Philippines, and Indonesia, Vietnam, Thailand, Philippines, and Singapore combinedSingapore combined..
How many people worldwide will go hungry so How many people worldwide will go hungry so motorists in rich countries can fuel their cars motorists in rich countries can fuel their cars and trucks?and trucks?
How big of a political issue will it become?How big of a political issue will it become?
Global Industrial Use of VegoilsGlobal Industrial Use of Vegoils
8.7 9.510.9
12.8
15.3
18.6
21.6
0
5
10
15
20
25
2000 2001 2002 2003 2004 2005 2006
Marketing Year Beginning
MM
T
Source: USDA
Global Industrial Use of Vegoils Global Industrial Use of Vegoils Versus Vegoil Consumption in IndiaVersus Vegoil Consumption in India
8.7 9.510.9
12.8
15.3
18.6
21.6
11.1 11.0 10.7 11.0 11.8 12.2 12.9
0
5
10
15
20
25
2000 2001 2002 2003 2004 2005 2006
Marketing Year Beginning
MM
T
Global Industrial Use IndiaSource: USDA
Past & Future Past & Future FoodFood Use of Vegoil Use of VegoilAnother 25 MMT Required in a DecadeAnother 25 MMT Required in a Decade
75
85
95
105
115
125
135
145
2000
2002
2004
2006
2008
2010
2012
2014
2016
Year
MM
T
At least 35 mmt of additional vegoil neededfor food uses in a decade
Past & Future Past & Future Non-FoodNon-Food Demand for Demand for VegoilVegoilAnother 25 MMT Required in a DecadeAnother 25 MMT Required in a Decade
0
10
20
30
40
50
2000
2002
2004
2006
2008
2010
2012
2014
2016
Year
MM
T
At least 23 mmt of additional vegoil needed
for industrial uses in a decade
The Food Versus Fuel Debate of The Food Versus Fuel Debate of the Future – A Moral Dilemmathe Future – A Moral Dilemma
If there is a global vegoil If there is a global vegoil shortage, who will win out? shortage, who will win out? Drivers in developed countries? Drivers in developed countries? Or poor consumers in Or poor consumers in developing countries?developing countries?
Expect this issue to rise to the Expect this issue to rise to the forefront in late 2007 or in forefront in late 2007 or in 20082008
U.S. Ethanol U.S. Ethanol ProductionProduction1990 - 20061990 - 2006
0
1
2
3
4
5
6
Calendar Year
Bill
ion
Gallo
ns
Source: Renewable Fuels Association
U.S. Non-Feed Use of CornU.S. Non-Feed Use of Corn1995/96 – 2005/06 and Forecast for 1995/96 – 2005/06 and Forecast for 2006/072006/07
41.4 43.5 45.8 46.9 48.6 49.7 52.059.4
64.4 68.275.6
89.9
0102030405060708090
100
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
Marketing Year Beginning
MM
T
CornCornGlobal Production and Global Production and ConsumptionConsumption
500
550
600
650
700
750
1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006
Marketing Year Beginning
MM
T
Production Consumption
Ethanol driving up demand
U.S. Forecasted Use of Corn for U.S. Forecasted Use of Corn for Ethanol, Other Domestic Uses, and Ethanol, Other Domestic Uses, and ExportsExports
0
50
100
150
200
250
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
Marketing Year Beginning
MM
T
Use for Ethanol Feed & Other Use Exports
Source: The ProExporter Network
CornCornGlobal Ending StocksGlobal Ending Stocks
165.2 165.7
190.4 192.9173.1
149.6
125.7103.6
131.3 124.2
91.8
0
50
100
150
200
250
300
1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006
Marketing Year Beginning
MM
T
Stocks declining because of ethanol
ChinaChinaCorn Production, Consumption and Net Corn Production, Consumption and Net ExportsExports
0
50
100
150
1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006
Marketing Year Beginning
MM
T
Production Net Exports Consumption
When will China become big corn importer?
US Corn, Cotton, Soybean & Wheat US Corn, Cotton, Soybean & Wheat Planted AreaPlanted Area1995 – 2006 and Forecast for 20071995 – 2006 and Forecast for 2007
10
30
50
70
90
110
1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007
Year of Harvest
Mill
ion
Ac
res
Corn Cotton Soybeans Wheat
Past and Forecasted Future Non-Past and Forecasted Future Non-USA Corn DemandUSA Corn Demand
300
350
400
450
500
550
600
1995 2000 2005 2010 2015
Additional 85 mmt of corn required in a decade
U.S. may export 30 mmt less corn
USA USA Soybean Production 1980 – 2006Soybean Production 1980 – 2006Forecast for 2007Forecast for 2007
0102030405060708090100
1980 1984 1988 1992 1996 2000 2004
Year
MMT
Prices of Malaysian Palm Oil and Prices of Malaysian Palm Oil and Argentine SoyoilArgentine SoyoilOctober 2003 – March 2007October 2003 – March 2007
$300$350
$400$450
$500$550
$600$650
$700
Octob
er
Decem
ber
Febr
uary
April
June
Augu
st
Octob
er
Decem
ber
Febr
uary
April
June
Augu
st
Octob
er
Decem
ber
Febr
uary
April
June
Augu
st
Octob
er
Decem
ber
Febr
uary
Palm Oil Argentine Soyoil
Key PointsKey Points
Pace of biodiesel expansion is unsustainablePace of biodiesel expansion is unsustainable Biofuels likely to cause glut of protein meals in Biofuels likely to cause glut of protein meals in
the future which will lead to lower pricesthe future which will lead to lower prices There will be a shakeout of biodiesel facilities There will be a shakeout of biodiesel facilities
worldwideworldwide Crushing sectors of several countries will go Crushing sectors of several countries will go
out of businessout of business Availability of U.S. corn for export likely to Availability of U.S. corn for export likely to
decline sharplydecline sharply Oilseeds will have tough time competing for Oilseeds will have tough time competing for
land with corn and wheat in the U.S. and land with corn and wheat in the U.S. and CanadaCanada
The Big Unknown – Petroleum PricesThe Big Unknown – Petroleum Prices
The major increase in petroleum prices was The major increase in petroleum prices was triggered by hurricanes Katrina and Rita last triggered by hurricanes Katrina and Rita last yearyear
The supply disruptions caused by the hurricanes The supply disruptions caused by the hurricanes now have been fixednow have been fixed
The main forces that drove petroleum prices The main forces that drove petroleum prices higher were hedge funds, speculators, and higher were hedge funds, speculators, and political risks (Iran, Iraq, Nigeria, Venezuela, political risks (Iran, Iraq, Nigeria, Venezuela, etc.)etc.)
Crude oil now blow $60/barrelCrude oil now blow $60/barrel It is possible there will be a substantial It is possible there will be a substantial
downward correction in petroleum prices downward correction in petroleum prices Substantially lower petroleum prices would Substantially lower petroleum prices would
greatly diminish viability of biofuelsgreatly diminish viability of biofuels
Questions?Questions?
John C. BaizeJohn C. BaizeJohn C. Baize and AssociatesJohn C. Baize and AssociatesTel: 703-698-5908Tel: 703-698-5908Email: [email protected]: [email protected]
