1. Dr. Robert Wisner: Grain Outlook 3/15/06 Iowa State University AgMarketing Resource Center AgMarketing Resource Center Biofuels & Global Agriculture 3/25/08 Dr. Robert Wisner, University Professor & BioFuels Economist

2. Recent Positive Developments in Biofuels 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?

3. Bio-Fuels: A Global Development Driving Forces: –High crude petroleum prices –Concern over green-house gas Emissions –Government policies –Energy security

4. 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 sources  Incentives for increased mass transportation  Wind power use increasing

5. Key Determinants of Grain- Based Biofuels Industry Size Crude Petroleum Price Grain & Oil Crop Prices Needed for Increased Area & ProductionGrain & Oil Crop Prices Needed for Increased Area & Production Crop Inputs Availability & Cost Government Mandates

6. West Texas Intermediate Crude Oil 0 10 20 30 40 50 60 70 80 90 100 19601965197019751980198519901995 2000 2005 dollars/barrel (monthly average price)

7. 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. gallons for 2015)For 2009: 500 mil. gallons of biodiesel (1 bil. gallons for 2015)

8. Source: Dr. Terry Francel, American Farm Bureau Federation & U.S. Energy Dept.

9. Cautions in 2008-09 Grain Markets 1.Fund Traders 2.Bio-diesel economics not good, no mandate until 2009. 2.Domestic user returns tighten with higher corn prices – livestock & fuel

10. Ethanol, demand growth & food inflation shifting China from to corn exporter to importer? 41 Countries Encourage Biofuels

11. U.S. expansion Continuing Changes in U.S. Ethanol Plants, 7/27/07 to 3/14/08 (From DTN) 1/8/08 3/14/08 7/27/07 11/6/07 1/8/08 3/14/08 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

12. Recent Start-ups & Soon to be on Line U.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 MarchGreenville, OH 110 March Hennepin, IL 100 AprilHennepin, 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 AprilMonona, IA 100 April Alexanderia, IN 65 Mid-AprilAlexanderia, IN 65 Mid-April Volney, NY 41 May-JnVolney, NY 41 May-Jn Total 710

13. 2007-08 U.S. corn supplies adequate to meet demand Crop up 24% -- 20% increase in corn hectares But at expense of: –16% decline in soybean planted area –29% decline in cotton area –8% decline in non-durum spring wheat –Declines in minor crops Soybean supplies tighten substantially, increased plantings needed in 2008Soybean supplies tighten substantially, increased plantings needed in 2008 More U.S. corn will be needed in 2009,More U.S. corn will be needed in 2009, 2010, 2011

17. Historical & Needed U.S. Corn Yield Deviation Needed From Trend 0.7 0.0 -10.2 0.0 16.2 1.8 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

22. 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

23. Total 11,693 mil. Bu. Figure 3.

24. Capacity: 159% of 2006 Crop Iowa Corn Processing Plants, Current & Planned, 7/25/07 72 Potential Iowa Plants 11 Just across IA Borders Figure 2.

28. Take-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

29. Thanks! Questions?