1. Biodiesel Industry Update John Hoffman American Soybean Association

2. The U.S. Biodiesel Industry Is Facing Some Challenges and Rough Weather

3. Presentation Includes:  Good News  Bad News  Worse News  Worser News  Good News again

4. US Biodiesel Production 2007 = 450 million gallons = 1.7 billion liters = 1.5 million metric tons – 1% of highway diesel use

5. Raw Material Use For Biodiesel - 2007

6. Production Locations (1/25/087 ) Annual Capacity = 2.24 billion gallons = 8.5 billion liters = 7.5 million metric tons  Biodiesel Plants  Million Gallons per Year <<  Greater than 20.0 << 55 .1  -  20 .0 << 55  and Less  BQ-9000 Producers  Million Gallons per Year <<  Greater than 20.0 << 55 .1  -  20 .0 << 55  and Less  170 Plants

7. Biodiesel Plants Under Construction & Expansion (1/25/08) Additional Capacity = 1.23 billion gallons = 4.6 billion liters = 4 million metric tons  Plant Status  Construction  (57)  Expansion  (3)

8. Key Incentives for Biodiesel Biodiesel Tax Incentive – Provides a tax credit to the blender of U.S. $1 per gallon (U.S. $0.26 per liter). Expires at end of 2008 unless extended. Renewable Fuel Standard – Will require that the U.S. transportation diesel supply contain: – 500 million gallons (1.9 billion liters) of biodiesel in 2009 – Ramping up to 1 billion gallons (3.8 billion liters) of biodiesel in 2012

9. Summary of Industry Challenges Economics range from tough to infeasible resulting in industry running at about 20% of existing capacity International Trade dispute filed by European biodiesel industry Negative campaign against biofuels underway by food and oil companies Biodiesel tax incentive expires at end of 2008 and must be extended Imports eligible for tax incentive

10. Feedstock Costs are Creating a Brake on Industry Growth Factors leading to high feedstock costs (resulting in thin to negative margins): Reduced U.S. acreage of soybeans in 2007 Competition for acres due to ethanol increase Expanding domestic and global biodiesel production capacity Value of USD relative to other currencies Record high vegetable oil prices – Central IL soybean oil (RBD) 61¢/lb. – One year ago, it was 32¢/lb., 2 years ago $.19/lb

11. High Feedstock Prices Lead to... Negative margins for many producers Idling or closure of a majority of biodiesel production capacity Use of more animal fats and yellow greases Significant investment in the development of nontraditional feedstocks like algae, camelina & jatrohpa

12. Tough Economic Environment Feedstock Cost: $.63/lb x 7.5 lb/gal = $4.72 Production cost:$0.50 Taxes:$.0.50 Distribution cost:$0.30 Profit margin?$0.0 Tax Credit:-$1.00 Estimated retail biodiesel price:$5.02 (illustration purposes only, may not reflect actual prices)

13. Running the Math Feedstock Cost: $.44/lb x 7.5 lb/gal = $3.30 Production cost:$0.50 Taxes:$0.50 Distribution cost:$0.30 Profit margin….8%$0.36 Tax Credit:-$1.00 Estimated retail biodiesel price:$3.96 ($.44/lb soybean oil would be 100% higher than 20 year historic avg.) (illustration purposes only, may not reflect actual prices)

14. “Sustainability” becoming key Food vs. Fuel Concerns about land use; De-forestation in Amazon, Malaysia, Indonesia Climate change: “Biofuels worse?” Soybeans have significant competitive advantage – Get mostly food (80% protein) – Oil (20%) used for both food AND fuel

16. Food and petro companies are executing well funded & well coordinated plan against biofuels Lots of erroneous information about impact of biofuels on food prices

17. The forecast….

18. Moving Ahead: Bright Spots & Opportunities  Trucker Market  Low blends of biodiesel to add lubricity  Heating Oil Market  Long-term market opportunity to increase soybean oil output through content and yield

19. Importance of Biodiesel Benefits for U.S. Consumers (Ranked by “1” ratings) National Survey conducted for the National Biodiesel Board in January 2008 1,124 Respondents