ANR Extension: Connecting with the BioEconomy Charles R. Hurburgh, Jr. Professor of Agricultural Engineering March 27, 2007

The goals of the Bioeconomy are: Enhanced national security –Reducing dependence on imported petroleum Improved environmental quality –Including mitigation of global climate change Increased markets for agricultural crops –With the benefit of reducing need for crop support programs Advances in rural development –Creating economic opportunities where the resource is located Courtesy USDA NRCS

…and renewable fuels are just one of many possible biobased products Biobased Products AdhesivesMotor Fuels Cleaning compounds Packaging materials DetergentsPaints Dielectric fluidsPaper Dyes, pigments & inks Plastic fillers Electric powerPolymers Hydraulic fluidsSolvents LubricantsSorbents

The Midwest will be the leading provider of biomass feedstocks Source: U.S. DOE

5 Corn Has Significant Potential for Biofuels Ethanol Productivity Potential bu/ac grain yield 100 Gal/Acre (2010) Stover 18 Gal/Acre (2010) Pericarp Gallons / Acre 1,000 gallons / acre by 2020? Grain Endosperm Bu/Ac Gal/Bu Gal/Ac GrainPericarp Stover Ton/Ac Gal/Ton Gal/Ac Ton/Ac Gal/Ton Gal/Ac Endosperm

Value Added Agriculture Program

Value Added Agriculture Program Slide Title Iowa corn processing & ethanol plants, current & planned, 10/26/06 63 Capacity: 129% of 2006 crop

Value Added Agriculture Program Current Iowa Dry-Grind plants Average production –60 million gal/yr 20 mgy – 110 mgy Plants produce at % above rated capacity Plants store about 5% of annual capacity DGS = 2.5% Most have outbound rail access Few (none) have inbound rail access

Value Added Agriculture Program Iowa Ethanol Plants Summary Statistics n Ethanol Produced mil gal/yr Corn Used mil bu/yr DGS 000 tons/yr Current Dry-grind Plants * Plants, expansions under construction Wet Mills Nearby, Iowa Draw** Subtotal Near-Term Use Announced Total *Operating at actual capacity, approximately 5-10% over rated capacity. **Plants in bordering counties of other states with 50% use assigned to Iowa corn.

Value Added Agriculture Program Ethanol plants buy 60% from farmers, want to buy more from farmers. - Farmers must be prepared to supply over the year, in a managed way. - Will elevators be surge capacity for times when farmers are not delivering Plants store about 5% of supply - Enough to cover temporary interruptions, no more. - Inbound grain goes right straight through to the process Plants stored about 2.5% of DGS - Move it or else (<10% of Revenue)

Value Added Agriculture Program Plants did not care about specialty grains trucks/day or 200 trucks/day - Means raising the area average and consistency will be more important Plants had absolute quality limits for US Grade factors – moisture, damage - Large change in culture for farmers - Means no leeway for storage problems, - Storing more grain longer. - Storage management will be important.

Value Added Agriculture Program Ethanol plants load rail but do not unload rail - Grain from local area - How to manage risk – crop insurance does an ethanol plant no good. - Increase in truck tonnages on local roads at all time of the year.

ANR Extension Challenge Find and promote a balance among: - crops and yield goals - crop production practices - processing methods, - plant operating strategies - etc. that still:

ANR Extension Challenge Provides efficient feed ingredient supply and competitive advantage for several livestock species. Does not add additional water or air pollution. Does not increase soil erosion or deteriorate soil quality Produces sufficient BioProducts

Economic Drivers

So Many Things Change This is a real business that attracts outside capital. Wall Street knows us.

So Many Things Change Decisions change quickly – economics less predictable. Much higher risk exposure. Real money on the table between landlords and tenants; business practice. Logistical and employment issues

So Many Things Change Raw material storage – where and by whom? Supply chain discipline No tolerance for poor quality materials Liability for product. Crop insurance check does not help a processor. $500/acre will make business more intense.

Challenges for Extension Extension is a support group with only indirect connection to net income. Information now! What’s my job today? What will we not do any more? Eliminate redundant activities Linear management chains

Change = Opportunity If someone came to GM and wanted Twice as many Silverado pickups and would pay Twice as much per pickup What would happen? That’s where agriculture is now. It’s a great time to be in agriculture!