Extension and Outreach/Department of Economics Economics of Ethanol Production: Iowa’s Strengths and Weaknesses Deerfield Retirement Center Urbandale, Iowa Aug. 30, 2011 Chad Hart Assistant Professor/Grain Markets Specialist

Extension and Outreach/Department of Economics Oil Prices Source: EIA for history, NYMEX for future

Extension and Outreach/Department of Economics Population (billion) World6.946World8.323World9.441 China1.337India1.461India1.657 India1.189China1.391China1.304 U.S.0.311U.S.0.366U.S Indonesia0.246Indonesia0.289Nigeria0.402 Brazil0.203Nigeria0.264Indonesia0.313 Pakistan0.187Pakistan0.243Pakistan0.291 Nigeria0.166Brazil0.240Ethiopia0.278 Bangladesh0.159Bangladesh0.211Brazil0.261 Russia0.139Ethiopia0.162Bangladesh0.250 Japan0.127Philippines0.138Philippines0.172 Source: U.S. Bureau of the Census, International Data Base

Extension and Outreach/Department of Economics Liquid Fuel Usage (Million Barrels Oil Equivalent per Day)(Percent of 2007 Value) United States20.698%100%102%104%107% Canada2.396% 100%104% Mexico2.1105%110%114%129%138% Europe15.392%88% 89%90% Japan5.084%86% 84%82% China7.6132%153%178%201%222% India2.8114%129%139%154%168% Africa3.1113%116%126%135%148% Central and South America6.0110%112%117%125%133% World %107%113%121%128% Source: Energy Information Administration

Extension and Outreach/Department of Economics Ethanol Production Source: EIA, 2011 Projection by Hart

Extension and Outreach/Department of Economics Ethanol Plant Locations Source: Ethanol Producer Magazine

Extension and Outreach/Department of Economics Monthly Ethanol Data Source: EIA

Extension and Outreach/Department of Economics Ethanol Penetration

Extension and Outreach/Department of Economics Nearby Futures (Jan. 3, 2011 = 1)

Extension and Outreach/Department of Economics Fuel Prices

Extension and Outreach/Department of Economics Ethanol Margin Source: CARD

Extension and Outreach/Department of Economics Ethanol Blending Advantage

Extension and Outreach/Department of Economics Ethanol Stocks Source: DOE, EIA

Extension and Outreach/Department of Economics Location and Products

Extension and Outreach/Department of Economics Tapping into Many Markets Source: 2009 FEW Conference presentation by Neal Jakel (Delta-T)

Extension and Outreach/Department of Economics Fuel Comparison

Extension and Outreach/Department of Economics Gasoline Consumption Source: EIA, Annual Energy Outlook

Extension and Outreach/Department of Economics Ethanol Blends

Extension and Outreach/Department of Economics Renewable Fuels Standard (RFS) 60% GHG Emission Reduction 50% GHG Emission Reduction 20% GHG Emission Reduction If construction started after Dec. 2007

Extension and Outreach/Department of Economics Countries Pursuing Biofuels  US  Brazil  Argentina  Colombia  Paraguay  Canada  Uruguay  Mexico  Thailand  New Zealand  South Africa  South Korea  Philippines  Indonesia  Pakistan  China  India  Malaysia  Australia  Japan  EU  Russia  Not a complete list

Extension and Outreach/Department of Economics Renewable Fuels Standard (RFS)

Extension and Outreach/Department of Economics RFS Coverage

Extension and Outreach/Department of Economics Government Policies for Biofuels Ethanol  Ad valorem tariff of 2.5%  Import duty of $0.54 per gallon  Volumetric Ethanol Excise Tax Credit (VEETC)  $0.45 per gallon Biodiesel  Biodiesel Mixture Excise Tax Credit  $1.00/0.50 per gallon Cellulosic  Cellulosic Biofuel Producer Tax Credit  $1.01 per gallon

Extension and Outreach/Department of Economics Biomass Crop Assistance Program  To support production of crops for bioenergy and assist with collection, harvest, storage, and transportation of biomass to conversion facilities  Excluded materials  Farm program crops, animal byproducts, food waste, yard waste, algae

Extension and Outreach/Department of Economics BCAP Resources Contracts Payments Bark 1,418 $46,696,187 Fuelwood 744 $34,403,825 Hardwood chips 805 $32,521,203 Forest harvest slash 386 $30,012,559 Forest thinnings materials 399 $27,220,001 Softwood chips 491 $17,661,305 Orchard wood waste 123 $15,000,377 Sawdust 357 $12,400,919 Pellets 70 $ 5,367,939 Non-edible, non Title 1 56 $ 3,226,417 plant processing waste and scraps Corn cobs 15 $ 61,612 Source: USDA-FSA

Extension and Outreach/Department of Economics Currently Available Biomass Source: NREL, 2005

Extension and Outreach/Department of Economics Spectrum of Biofuels Source: NREL, 2006  Grain/Sugar Ethanol  Biodiesel  Green Gasoline/Diesel  Cellulosic Ethanol  Butanol  Pyrolysis Liquids  Syngas Liquids Most Mature Least Mature

Extension and Outreach/Department of Economics Biofuel Challenges  Production costs  Conversion, ag. production, etc.  Infrastructure barriers  Developing supply chain for biomass  Continued development of biofuel distribution system  Growth in biofuel-compatible vehicles

Extension and Outreach/Department of Economics Biofuel Challenges  Investment risks  Higher capital costs, emerging technology  Biomass production shifts  Inducing farmers to produce new crops  Consumer understanding  About the fuels  About the tradeoffs

Extension and Outreach/Department of Economics Thank you for your time! Any questions? My web site: Iowa Farm Outlook: Ag Decision Maker: