1. Estimated Impacts of Attaining 60 Billion Gallons of Ethanol by 2030 on Agriculture and the Nation’s Economy Governor’s Ethanol Coalition Kansas City, Kansas October 3, 2006 Burton C. English Daniel G. De La Torre Ugarte Kim Jensen Agricultural Policy Analysis Center http://agpolicy.org/

2. The Story  Agriculture can have a significant role in meeting America’s energy needs.  Providing feedstocks for ethanol production could be a new multi-billion dollar industry measured in net returns.  Savings in government payments of $9 to $100 billion.  Create a 360 billion $ industry within the U.S. creating 2.4 million more jobs. Many of which will be located in RURAL AMERICA  Could reduce imports of gasoline by more than 1.0 billion barrels, valued at more than $160 billion dollars.

3. The Modeling Process  Modeling is both a science and an art In this type of modeling effort we attempt to project numerous variables into the future. To reduce the number of variables we predict, we use a baseline developed by USDA and extend it to the year 2030 (USDAext2030). We change the baseline to accommodate the scenario we wish to study and compare the results to that baseline to determine the changes in the agricultural sector that might occur.

4. The Goal  10, 30, and 60 million gallons ethanol from renewable feedstocks by 2010, 2020, and 2030, respectively. (GEC)  60 million gallons ethanol from renewable feedstocks by 2030 with corn adjusted (GECCornadj)  60 million gallons ethanol from renewable feedstocks by 2030 with corn adjusted and cellulosic ethanol delayed until 2015 (GEC with Corn Adj & CED)

5. The GEC Goal

6. Biodiesel Goal

7. Objectives  This progress report summarizes the impacts to the agricultural sector and economic impacts on the nation of providing and converting biomass to 60 million gallons of ethanol from renewable sources.  The impacts of two assumptions are examined:  Corn adjustment, and  Corn adjustment and cellulosic ethanol delayed to 2015.

8. Renewable Energy Feedstocks From Agriculture

9. Cellulosic Materials Corn Stover and Wheat Straw  Readily available.  Some view as a waste; however, some currently is marketed, it provides nutrients and serves as cover for erosion control.  Should not be removed on highly erodible lands.  While I am not an agronomist, I have read recommendations to leave 2000 pounds on the ground on non-erosive lands.  These are incorporated into our modeling activities.  We are not assuming anything about carbon as of yet, but the carbon issue could reduce the quantity available even further.

10. Dedicated Energy Crops  Are produced primarily for use as feedstocks in energy generation processes and include hybrid poplar, hybrid willow, and switchgrass.  Switchgrass is our model crop. Perennial Low input Native to US Wildlife enhancing Low erosion Low chemical use

11. Other Cellulosic Materials  Forestry Residues are the biomass material remaining in forests that have been harvested for timber and are composed of logging residues, rough rotten salvageable dead wood, and excess small pole trees.  Mill Residues are unused waste woods from manufacturing operations that would otherwise be landfilled, including primary mill residues, pallets, etc.  Fuel Reduction Materials consist of small diameter wood removed from managed forests in order to reduce wildfires.

12. Current Land Use 2002 2002 Agricultural Census

13. Assumptions for a Potential Outlook Yield by 2030: Crops: corn (195 bu/ac), soybeans (51 bu/ac), wheat (53.2 bu/ac), cotton (981 pounds), energy crop (6 to12 dt/acre). Management Practices: Increase crop residues by shifting corn and wheat acreage to 50% no-till, 30% reduced till and 20% conventional till by 2030.

14. Rate of Growth Increase in Yields Assumed Beyond 2015 USDAextGEC Corn (bushels)1.13%1.69% Sorghum (bushels)0.76%1.13% Oats (bushels)0.61%0.91% Barley (bushels)0.88%1.31% Wheat (bushels)0.88%1.32% Soybeans (bushels)0.93%1.39% Cotton (pounds)0.43%0.64% Rice (pounds)0.79%1.19%

15. Assumptions for a Potential Outlook Commodity Programs: R emain as specified in 2006. Conversion Efficiency: Improved cellulosic ethanol to an average of 89 gallons/ton by 2030 and corn ethanol conversion to 3 gallons/bushel (97 gallons/ton) by 2015. Other means to produce ethanol from food wastes remained at the current conversion rate.

16. Ethanol Production: By Feedstock, 2006 – 2030 GEC Scenario Billion Gallons

17. Ethanol Production: By Feedstock, 2006 – 2030 GEC Cornadj Scenario Billion Gallons

18. Ethanol Production: By Feedstock, 2006 – 2030 GEC Cornadj CED Scenario Billion Gallons

19. Land Use: 2007, 2010, 2015, 2020, 2025, and 2030 (GEC) Million acres

20. Land Use: 2007, 2010, 2015, 2020, 2025, and 2030, GEC Cornadj Scenario Million acres

21. Land Use: 2007, 2010, 2015, 2020, 2025, and 2030, GEC Cornadj CED to 2015 Million acres

22. Estimated Prices by Scenario for Corn 200720102015202020252030 USDAext2030$2.20$2.60 $2.51$2.46$2.41 GEC$2.44$3.49$3.29$2.87$2.42$3.03 GEC corn adj allowed$2.44$3.46$2.98$2.45$2.32$2.93 GEC corn adj allowed, CED$2.44$3.46$4.65$2.70$2.31$3.00

23. Estimated Prices by Scenario for Soybeans 200720102015202020252030 USDAext2030$5.40$5.95$6.10$5.85$5.69$5.53 GEC$5.83$6.77$7.59$6.82$6.67$6.76 GEC corn adj allowed$5.79$6.70$6.75$6.66$6.24$6.44 GEC corn adj allowed, CED$5.79$6.70$7.52$6.60$6.23$6.42

24. Estimated Prices by Scenario for Wheat 200720102015202020252030 USDAext2030$3.10$3.25$3.55$3.50$3.47$3.43 GEC$3.12$3.36$3.87$3.57$3.48$3.96 GEC corn adj allowed$3.12$3.36$3.74$3.50$3.41$3.79 GEC corn adj allowed, CED$3.12$3.36$4.01$3.50$3.40$3.79

25. Estimated Non Land Costs of Producing Switchgrass ($/dry ton) 200720102015202020252030 USDAext2030$0.00 GEC$0.00 $26.18$22.78$27.13$27.58 GEC corn adj allowed$0.00 $27.89$25.96$27.59$28.81 GEC corn adj allowed, CED$0.00 $21.58$25.98$27.06$29.73

26. Estimated Level of Government Payments by Government Program Government Program and Scenario Projected for the Year:Total 200720102015202020252030 Million dollars Loan Deficiency : GEC 780000034,098 USDAExt2030 81636000005,069 Contract: GEC 4,2495,168 127,833 USDAExt2030 4,2495,168 127,833 Counter Cyclical: GEC 2,1261,45047057157468224,833 USDAExt2030 3,4581,71486883281975732,616 Other: GEC 3,9504,4903,610 98,470 USDAExt2030 3,9504,4903,610 98,470 Total Payments: GEC 11,10511,1089,2489,3499,3529,463255,234 USDAExt2030 12,47311,7329,6469,6109,5979,535263,988

27. Projected Volume of Exports for Selected Years and Scenario

28. Projected Value of Agricultural Exports for Corn, Wheat, Soybeans, and Cotton by Selected Year and Scenario Crop and Scenario Projected for the year: 200720102015202020252030 Corn: GEC 4,733 6,158 5,565 6,112 6,204 6,864 USDAExt2030 4,455 5,525 6,175 6,474 6,854 7,259 Wheat: GEC 2,982 3,391 4,240 4,183 4,418 4,699 USDAExt2030 2,945 3,250 3,994 4,174 4,410 4,657 Soybeans: GEC 5,903 5,122 3,714 4,420 4,991 4,300 USDAExt2030 5,832 6,128 5,947 6,055 6,253 6,468 Cotton: GEC 3,731 3,835 4,115 4,380 4,510 4,659 USDAExt2030 3,731 3,868 4,460 4,798 5,067 5,358 Total: GEC 18,65619,94819,38620,76722,00222,202 USDAExt2030 18,27120,16222,17923,220 4,42025,681

29. Change in Soybean Acreage, GEC, 2015

30. Change in Soybean Acreage, GEC, 2030

31. Distribution of the Production of Cellulosic Materials, GEC, 2010

32. Distribution of the Production of Cellulosic Materials, GEC, 2015

33. Distribution of the Production of Cellulosic Materials, GEC, 2020

34. Distribution of the Production of Cellulosic Materials, GEC, 2030

35. Changes in Farm Income and Government Payments (million $)

36. Change in Net Returns -- 2010 GEC

37. Change in Net Returns -- 2020 GEC

38. Change in Net Returns -- 2030 GEC

39. Estimated Annual National Impacts under the 30, and 60 gallon ethanol goal for 2020 and 2030; Respectively. Year and Sector Change in Industry Output Impact in Employment Direct ImpactTotal ImpactDirect ImpactTotal Impact Millionnumber of jobs 2020: Agricultural Production Sector $13,906$21,903 161,146242,487 Renewable Energy Sector $37,466$76,378 23,296398,864 Interstate Commerce a $0$73,282 0558,986 Total $51,373$171,564 184,4421,200,337 2030: Agricultural Production Sector $24,869$37,527 235,709359,674 Renewable Energy Sector $85,093$171,096 57,597898,192 Interstate Commerce a $0$159,730 01,229,325 Total $109,962$368,353 293,3062,487,191 a Since ethanol is a relatively new industry in many of the states, the estimated state level impacts did not capture the impacts of interstate commerce.

40. Agricultural Economic Activity, GEC, 2030

41. Change in Employment as a Result of Changes in Agricultural Economic Activity, GEC, 2030

42. Economic Activity as a Result of Conversion, GEC, 2030

43. Change in Employment as a Result of Changes in Agricultural Economic Activity, GEC, 2030

44. Conclusions Preliminary results indicate that: There is sufficient potential from America’s agricultural and forest lands to produce energy without impacting food security Currently, we have substantial capacity for production from underutilized lands

45. Conclusions (Continued) Marketing additional energy from agriculture sector could result in:  Increased Farm Income,  Reduced Government Payments,  Increased Rural Economic Development,  Enhanced Environmental Benefits, and  Reduction in Foreign Oil Dependency.

46. Agricultural Policy Analysis Center http://agpolicy.org/ Bio-based Energy Analysis Group http://beag.ag.utk.edu/ Department of Agricultural Economics, Institute of Agriculture University of Tennessee http://www.agriculture.utk.edu/ Project analysis team includes Chad Hellwinckel, Jamey Menard, Roland Roberts, Marie Walsh, and Brad Wilson in addition to Burton English, Daniel G. de la Torre Ugarte, and Kim Jensen