1. Department of Economics Trends & Issues in Agriculture 2009 Nationwide Agribusiness Annual Commercial Policyholder Conference Des Moines, Iowa August 20, 2009 Chad Hart Assistant Professor/Grain Markets Specialist chart@iastate.edu 515-294-9911

2. Department of Economics Increased Volatility Will Remain in Agriculture

3. Department of Economics Outside Influences (Jan. 2007 = 1)

4. Department of Economics Input Costs Source: USDA, Agricultural Prices, July 31, 2009

5. Department of Economics Ammonia Prices Source: http://www.fertilizerworks.com/html/market/ TheMarket.pdf

6. Department of Economics Outside Influences (Jan. 2009 = 1)

7. Department of Economics Agriculture’s Market Reach Is Expanding

8. 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

9. Department of Economics Biomass Wind Solar Alternative Sources

10. Department of Economics Bio-based Market Opportunities Source: Informa Economics, Biobased Multi-Client Study, March 2006

11. Department of Economics Biobased Pathways Source: USDA, 2008, U.S. Biobased Products: Market Potential and Projections Through 2025

12. Department of Economics Dept. of Energy Projections Source: Energy Information Administration, Annual Energy Outlook 2009

13. Department of Economics The U.S. Is Taking A More “Global” Approach To Issues

14. Department of Economics Draft Lifecycle GHG Reductions Source: EPA, May 2009

15. Department of Economics CARB Fuel Carbon Values Source: CA Air Resources Board, Summer 2009

16. Department of Economics Climate Change Legislation Source: Congressional Research Service American Clean Energy and Security Act of 2009 (H.R. 2454) Requires utilities to supply an increasing percentage of their demand from a combination of energy efficiency savings and renewable energy (6% in 2012, 9.5% in 2014, 13% in 2016, 16.5% in 2018, and 20% in 2021-2039). Provides for issuing, trading, banking, retiring, and verifying renewable electricity credits. Establishes targets to cap and reduce greenhouse gas (GHG) emissions, annually, so that GHG emissions from capped sources are reduced to 97% of 2005 levels by 2012, 83% by 2020, 58% by 2030, and 17% by 2050; and establish a federal GHG registry. Provides for trading, banking and borrowing, auctioning, selling, exchanging, transferring, holding, or retiring emission allowances.

17. Department of Economics Climate Change Legislation Source: Craig Raysor, Gillon & Associates, PLLC Agriculture provisions in the bill Provides some exemptions from the GHG emission reduction requirements for agriculture and forestry Provides incentive-based approach to GHG emission reduction/capture Allows USDA to help establish eligible GHG offset practices and review of those practices Shifts question on indirect-land-use to an independent panel for study with EPA and USDA to review in the future (with a rule to be in place 6 years after passage) Allows for a specific exemption for livestock (enteric fermentation from ruminant animals) from uncapped emissions guidelines

18. Department of Economics Climate Change Legislation Source: USDA, Office of Chief Economist “A Preliminary Analysis of the Effects of HR2454 on U.S. Agriculture”

19. Department of Economics Climate Change Legislation Source: Ben Lieberman, Heritage Foundation, July 21, 2009 “Since farming is energy intensive, it will be hit hard by Waxman-Markey's energy price hikes. In addition to higher diesel fuel and electricity costs, prices for natural gas-derived fertilizers and other chemicals will also rise. Everything else affecting agriculture, from the cost of constructing farm buildings to the price of tractors and other farm equipment, will also go up. Consequently, farm profits are expected to decline by 28 percent in 2012 and will be an average 57 percent lower from 2012-2035.”

20. Department of Economics Climate Change Legislation Source: Rep. Collin Peterson (D-MN), Hutchinson (MN) Leader, July 23, 2009 “Ultimately, greenhouse gas emissions are probably going to be regulated, whether Congress acts or not. In 2007, the Supreme Court ruled that the Environmental Protection Agency has the authority under the Clean Air Act to regulate greenhouse gas emissions if they are found to endanger public health or welfare. The Supreme Court required EPA to determine if they are a public health hazard or not, and earlier this year, the EPA put out a proposed finding that says greenhouse gas emissions are a danger to public health and welfare.”

21. Department of Economics But The World Keeps On Growing

22. Department of Economics Population 2008 2020 2050 (billion) World6.678World7.601World9.393 China1.330China1.431India1.808 India1.148India1.362China1.424 U.S.0.304U.S.0.336U.S.0.420 Indonesia0.238Indonesia0.268Nigeria0.357 Brazil0.192Brazil0.212Indonesia0.313 Pakistan0.168Pakistan0.204Bangladesh0.280 Bangladesh0.154Bangladesh0.190Pakistan0.278 Russia0.141Nigeria0.184Brazil0.228 Nigeria0.138Russia0.132Congo0.189 Japan0.127Mexico0.125Mexico0.148 Source: U.S. Bureau of the Census, International Data Base

23. Department of Economics Liquid Fuel Usage 200620102015202020252030 (Million Barrels Oil Equivalent per Day)(Percent of 2006 Value) United States20.795%98% 100%105% Canada2.3100% 104%109% Mexico2.171%81%90%95%100% Europe15.792% 95%96% Japan5.288%92%96%92%90% China7.2118%139%168%192%213% India2.789%115%144%159%174% Africa3.0117%120%123%127%130% Central and South America5.7116% 119%125%133% World85.0102%107%113%119%125% Source: Energy Information Administration

24. 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

25. 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

26. 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

27. 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

28. Department of Economics A Long-Term Outlook on Agriculture

29. Department of Economics Average Annual GDP Growth, 2008-2018 Source: FAPRI 2009 Outlook

30. Department of Economics Average Annual Exchange Rate Change, 2008-2018 Source: FAPRI 2009 Outlook

31. Department of Economics U.S. Crop Planted Area, 1998-2018 Source: FAPRI 2009 Outlook

32. Department of Economics U.S. Crop Prices, 1998-2018 Source: FAPRI 2009 Outlook

33. Department of Economics U.S. Crop Inputs, 1998-2018 Source: FAPRI 2009 Outlook

34. Department of Economics U.S. Livestock Production, 1998-2018 Source: FAPRI 2009 Outlook

35. Department of Economics U.S. Livestock Prices, 1998-2018 Source: FAPRI 2009 Outlook

36. Department of Economics U.S. Farm Income, 1998-2018 Source: FAPRI 2009 Outlook

37. Department of Economics World Wheat Trade, 2000-2018 Source: FAPRI 2009 Outlook

38. Department of Economics World Corn Trade, 2000-2018 Source: FAPRI 2009 Outlook

39. Department of Economics World Soybean Trade, 2000-2018 Source: FAPRI 2009 Outlook

40. Department of Economics World Meat, 2000-2018 Source: FAPRI 2009 Outlook

41. Department of Economics Thank you for your time! Any questions? My web site: http://www.econ.iastate.edu/faculty/hart/ Iowa Farm Outlook: http://www.econ.iastate.edu/outreach/agriculture/periodicals/ifo/ Ag Decision Maker: http://www.extension.iastate.edu/agdm/