1. University Extension/Department of Economics Crop and Biofuel Outlook and Issues Agricultural Credit School Ames, Iowa June 7, 2010 Chad Hart Assistant Professor/Grain Markets Specialist chart@iastate.edu 515-294-9911

2. University Extension/Department of Economics U.S. Corn Supply and Use Source: USDA 2007200820092010 Area Planted(mil. acres)93.586.086.588.8 Yield(bu./acre)150.7153.9164.7163.5 Production(mil. bu.)13,03812,09213,11013,370 Beg. Stocks(mil. bu.)1,3041,6241,6731,738 Imports(mil. bu.)201410 Total Supply(mil. bu.)14,36213,72914,79315,118 Feed & Residual(mil. bu.)5,9135,2055,3755,350 Ethanol(mil. bu.)3,0493,6774,4004,600 Food, Seed, & Other(mil. bu.)1,3381,3161,3301,350 Exports(mil. bu.)2,4371,8581,9502,000 Total Use(mil. bu.)12,73712,05613,05513,300 Ending Stocks(mil. bu.)1,6241,6731,7381,818 Season-Average Price($/bu.)4.204.063.603.50

3. University Extension/Department of Economics U.S. Soybean Supply and Use 2007200820092010 Area Planted(mil. acres)64.775.777.578.1 Yield(bu./acre)41.739.744.042.9 Production(mil. bu.)2,6772,9673,3593,310 Beg. Stocks(mil. bu.)574205138190 Imports(mil. bu.)10131510 Total Supply(mil. bu.)3,2613,1853,5123,510 Crush(mil. bu.)1,8031,6621,7351,640 Seed & Residual(mil. bu.)93102133154 Exports(mil. bu.)1,1591,2831,4551,350 Total Use(mil. bu.)3,0563,0473,3233,144 Ending Stocks(mil. bu.)205138190365 Season-Average Price($/bu.)10.109.979.508.75 Source: USDA

4. University Extension/Department of Economics U.S. Corn Emergence Source: USDA, Crop Progress

5. University Extension/Department of Economics U.S. Soybean Planting Source: USDA, Crop Progress

6. University Extension/Department of Economics World Corn Production Source: USDA

7. University Extension/Department of Economics Corn – Argentina & Brazil Source: USDA

8. University Extension/Department of Economics World Soybean Production Source: USDA

9. University Extension/Department of Economics Soybeans – Argentina & Brazil Source: USDA

10. University Extension/Department of Economics Population 2010 2020 2050 (billion) World6.831World7.558World9.202 China1.330China1.385India1.657 India1.173India1.326China1.304 U.S.0.310U.S.0.341U.S.0.439 Indonesia0.243Indonesia0.268Indonesia0.313 Brazil0.201Brazil0.223Ethiopia0.278 Pakistan0.177Pakistan0.204Pakistan0.276 Bangladesh0.158Nigeria0.182Nigeria0.264 Nigeria0.152Bangladesh0.181Brazil0.260 Russia0.139Russia0.132Bangladesh0.234 Japan0.127Mexico0.125Congo0.189 Source: U.S. Bureau of the Census, International Data Base

11. University Extension/Department of Economics In 2020, we will use 26 billion bushels of wheat, 36 billion bushels of corn, and 11 billion bushels of soybeans. World Consumption Growth Sources: USDA, FAPRI In 2000, we used 21.5 billion bushels of wheat, 24 billion bushels of corn, and 6 billion bushels of soybeans.

12. University Extension/Department of Economics Exchange Rates (Jan. 2003 = 1) Source: USDA, ERS

13. University Extension/Department of Economics Corn Export Sales Source: USDA, FAS

14. University Extension/Department of Economics 2009 U.S. Corn Exports Source: USDA, FAS

15. University Extension/Department of Economics Soybean Export Sales Source: USDA, FAS

16. University Extension/Department of Economics 2009 U.S. Soybean Exports Source: USDA, FAS

17. University Extension/Department of Economics Renewable Fuels Standard (RFS) Crop Year Billion Bushels 20094.11 20104.43 20114.64 20124.86

18. University Extension/Department of Economics Changing Basis Patterns

19. University Extension/Department of Economics Basis Two Years Ago

20. University Extension/Department of Economics Basis This Year

21. University Extension/Department of Economics Corn

22. University Extension/Department of Economics Soy

23. University Extension/Department of Economics Input Costs Source: USDA, Agricultural Prices, May 28, 2010

24. University Extension/Department of Economics Iowa Corn Prices vs. Costs Right now, about a nickel under breakeven with USDA about 9 cents under breakeven with futures

25. University Extension/Department of Economics Iowa Soybean Prices vs. Costs Right now, 7 cents over breakeven with USDA at breakeven with futures

26. University Extension/Department of Economics Thoughts for 2010 and Beyond  General economic conditions  Continued economic recovery is a major key for crop prices  Concerns about Euro driving investment to “safe havens” like the dollar  Long-term oil price remain in the $90 range  Supply/demand concerns  South America: Record soybean crop and large corn crop  Will demand be able to keep pace with supply?  2009/10:USDA:Corn $3.60, Soy $9.50 Futures:Corn $3.47, Soy $9.42  2010/11:USDA:Corn $3.50, Soy $8.75 Futures:Corn $3.47, Soy $8.68

27. University Extension/Department of Economics Population 2010 2020 2050 (billion) World6.831World7.558World9.202 China1.330China1.385India1.657 India1.173India1.326China1.304 U.S.0.310U.S.0.341U.S.0.439 Indonesia0.243Indonesia0.268Indonesia0.313 Brazil0.201Brazil0.223Ethiopia0.278 Pakistan0.177Pakistan0.204Pakistan0.276 Bangladesh0.158Nigeria0.182Nigeria0.264 Nigeria0.152Bangladesh0.181Brazil0.260 Russia0.139Russia0.132Bangladesh0.234 Japan0.127Mexico0.125Congo0.189 Source: U.S. Bureau of the Census, International Data Base

28. University Extension/Department of Economics Liquid Fuel Usage 200720152020202520302035 (Million Barrels Oil Equivalent per Day)(Percent of 2007 Value) United States20.698%100%102%104%107% Canada2.396% 100%104% Mexico2.1105%110%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% World86.1103%107%113%121%128% Source: Energy Information Administration

29. University Extension/Department of Economics Crude Oil Prices Source: Energy Information Administration

30. University Extension/Department of Economics Price Movements Since 2007

31. University Extension/Department of Economics Price Movements in 2010

32. University Extension/Department of Economics Ethanol Margins Source: ISU, CARD

33. University Extension/Department of Economics Ethanol Blending Advantage

34. University Extension/Department of Economics Renewable Fuels Standard (RFS) Crop Year Billion Bushels 20094.11 20104.43 20114.64 20124.86

35. University Extension/Department of Economics Renewable Fuels Standard (RFS)

36. University Extension/Department of Economics CARB Fuel Carbon Values Source: CA Air Resources Board, April 2009

37. University Extension/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

38. University Extension/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 starting in 2009 Biodiesel  Biodiesel Mixture Excise Tax Credit  Expired, may be revived  $1.00/0.50 per gallon Cellulosic  Cellulosic Biofuel Producer Tax Credit  $1.01 per gallon

39. University Extension/Department of Economics Cellulosic Biofuel Waiver Provisions  EPA (in consultation with DOE and USDA) can reduce the cellulosic biofuel mandated volume  Waiver trigger based on EIA projections  EPA will also sell cellulosic biofuel credits  Price set at Max($0.25 per gallon, $3.00 – Average wholesale gasoline price per gallon)

40. University Extension/Department of Economics Components of 2007 Energy Act  Up to $500 million per year in grants for the production of advanced biofuels (with at least an 80% reduction in GHG emissions relative to current fuels)  Up to $25 million per year in grants for R&D for biofuel production in states with low rates of biofuel production

41. University Extension/Department of Economics Energy in the Farm Bill  Grants for the development and construction of advanced biofuel biorefineries, up to 30% of the cost of the project  Loans for the same, up to $250 million or 80% of the cost per project

42. University Extension/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

43. University Extension/Department of Economics Biomass Crop Assistance Program  Requires producers and conversion facilities to submit proposal establishing a project area  Establishes contracts between USDA, producers, and facilities to promote project  Sets up establishment payments for perennial crops and annual payment to biomass producers

44. University Extension/Department of Economics Biomass Crop Assistance Program  Payments are also authorized for biomass collection, harvest, storage, and transportation  Matching payments  $1 for each $1 per ton paid by conversion facility, up to $45 per ton, for 2 years

45. University Extension/Department of Economics Currently Available Biomass Source: NREL, 2005

46. University Extension/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

47. University Extension/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

48. University Extension/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

49. University Extension/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/