University Extension/Department of Economics Crop and Biofuel Outlook and Issues Agricultural Credit...

University Extension/Department of Economics

Crop and Biofuel Outlook and Issues

Agricultural Credit SchoolAmes, Iowa

June 7, 2010

Chad HartAssistant Professor/Grain Markets Specialist

[email protected]


U.S. Corn Supply and Use

Source: USDA

2007 2008 2009 2010

Area Planted (mil. acres) 93.5 86.0 86.5 88.8

Yield (bu./acre) 150.7 153.9 164.7 163.5

Production (mil. bu.) 13,038 12,092 13,110 13,370

Beg. Stocks (mil. bu.) 1,304 1,624 1,673 1,738

Imports (mil. bu.) 20 14 10 10

Total Supply (mil. bu.) 14,362 13,729 14,793 15,118

Feed & Residual (mil. bu.) 5,913 5,205 5,375 5,350

Ethanol (mil. bu.) 3,049 3,677 4,400 4,600

Food, Seed, & Other (mil. bu.) 1,338 1,316 1,330 1,350

Exports (mil. bu.) 2,437 1,858 1,950 2,000

Total Use (mil. bu.) 12,737 12,056 13,055 13,300

Ending Stocks (mil. bu.) 1,624 1,673 1,738 1,818

Season-Average Price ($/bu.) 4.20 4.06 3.60 3.50


U.S. Soybean Supply and Use2007 2008 2009 2010

Area Planted (mil. acres) 64.7 75.7 77.5 78.1

Yield (bu./acre) 41.7 39.7 44.0 42.9

Production (mil. bu.) 2,677 2,967 3,359 3,310

Beg. Stocks (mil. bu.) 574 205 138 190

Imports (mil. bu.) 10 13 15 10

Total Supply (mil. bu.) 3,261 3,185 3,512 3,510

Crush (mil. bu.) 1,803 1,662 1,735 1,640

Seed & Residual (mil. bu.) 93 102 133 154

Exports (mil. bu.) 1,159 1,283 1,455 1,350

Total Use (mil. bu.) 3,056 3,047 3,323 3,144

Ending Stocks (mil. bu.) 205 138 190 365

Season-Average Price ($/bu.) 10.10 9.97 9.50 8.75

Source: USDA


U.S. Corn Emergence

Source: USDA, Crop Progress

0

20

40

60

80

100

4/15 4/22 4/29 5/6 5/13 5/20 5/27 6/3 6/10

% E

mer

ged

Maximum since 1999 Minimum since 19992010 20095-yr Average (2005-2009)


U.S. Soybean Planting

Source: USDA, Crop Progress

0

20

40

60

80

100

4/22 4/29 5/6 5/13 5/20 5/27 6/3 6/10 6/17 6/24 7/1

% P

lant

ed

Maximum since 1980 Minimum since 1980

2010 2009

5-yr Average (2005-2009)


World Corn Production

Source: USDA


Corn – Argentina & Brazil

Source: USDA

35

38

41

44

47

50

Mill

ion

acr

es

1800

2100

2400

2700

3000

3300

Mill

ion

bu

she

ls

Area Harvested Production


World Soybean Production

Source: USDA


Soybeans – Argentina & Brazil

Source: USDA

65

75

85

95

105M

illio

n a

cre

s

2700

3150

3600

4050

4500

Mill

ion

bu

she

ls

Area Harvested Production


Population2010 2020 2050

(billion) (billion) (billion)World 6.831 World 7.558 World 9.202

China 1.330

China 1.385

India 1.657

India 1.173

India 1.326

China 1.304

U.S. 0.310 U.S. 0.341 U.S. 0.439Indonesia 0.243

Indonesia 0.268

Indonesia 0.313

Brazil 0.201

Brazil 0.223 Ethiopia 0.278

Pakistan 0.177

Pakistan 0.204

Pakistan 0.276

Bangladesh 0.158 Nigeria 0.182 Nigeria 0.264

Nigeria 0.152Bangladesh 0.181

Brazil 0.260

Russia 0.139Russia 0.132

Bangladesh 0.234

Japan 0.127

Mexico 0.125 Congo 0.189

Source: U.S. Bureau of the Census,International Data Base


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

0%

10%

20%

30%

40%

50%

60%

70%

80%

00

/01

01

/02

02

/03

03

/04

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/05

05

/06

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/07

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/19

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/20

Wheat Corn Soybeans

In 2000, we used 21.5 billion bushels of wheat, 24 billion bushels of corn, and 6 billion bushels of soybeans.


0.4

0.6

0.8

1.0

1.2

1.4

1.6

Canada Mexico Brazil EU China South KoreaJapan Australia

Exchange Rates (Jan. 2003 = 1)

Source: USDA, ERS


Corn Export Sales

Source: USDA, FAS

0

500

1,000

1,500

2,000

2,500

Week

Mill

ion

bu

she

ls

2007 2008 2009


2009 U.S. Corn Exports

Source: USDA, FAS

Other23%

Taiwan7%

South Korea17%

Egypt5%

Mexico18%

Japan30%


Soybean Export Sales

Source: USDA, FAS

0

300

600

900

1,200

1,500

Week

Mill

ion b

ush

els

2007 2008 2009


2009 U.S. Soybean Exports

Source: USDA, FAS

Mexico7%

Japan5%

Other21%

EU7%

China60%


0

2

4

6

8

10

12

14

16

2010 2011 2012

Bill

ion

ga

llon

s

Conventional Biofuels Cellulosic Biofuels

Biodiesel Additional Advanced Biofuels

Renewable Fuels Standard (RFS)

CropYear

Billion Bushels

2009 4.11

2010 4.43

2011 4.64

2012 4.86


Changing Basis Patterns


Basis Two Years Ago


Basis This Year


2007/082008/09

2009/102010/11

1.50

2.00

2.50

3.00

3.50

4.00

4.50

0% 5% 10% 15% 20% 25% 30%

Stocks-to-use ratio

Pric

e ($

per

bus

hel)

Corn


2007/082008/09

2010/11

2009/10

4

5

6

7

8

9

10

11

0% 5% 10% 15% 20%

Stocks-to-use Ratio

Pric

e ($

per

bus

hel)

Soy


Input Costs

Source: USDA, Agricultural Prices, May 28, 2010


1.00

1.50

2.00

2.50

3.00

3.50

4.00

4.50

1972

1974

1976

1978

1980

1982

1984

1986

1988

1990

1992

1994

1996

1998

2000

2002

2004

2006

2008

2010

$ pe

r B

ushe

l

Season-average Price Cost per Bushel

Iowa Corn Prices vs. Costs

Right now, about a nickel under breakeven with USDAabout 9 cents under breakeven with futures


2.00

3.00

4.00

5.00

6.00

7.00

8.00

9.00

10.00

11.00$

per

Bus

hel

Season-average Price Cost per Bushel

Iowa Soybean Prices vs. Costs

Right now, 7 cents over breakeven with USDAat breakeven with futures


Thoughts for 2010 and BeyondGeneral economic conditions

Continued economic recovery is a major key for crop pricesConcerns about Euro driving investment to “safe havens” like the dollarLong-term oil price remain in the $90 range

Supply/demand concernsSouth America: Record soybean crop and large corn cropWill demand be able to keep pace with supply?

2009/10: USDA: Corn $3.60, Soy $9.50Futures: Corn $3.47, Soy $9.42

2010/11: USDA: Corn $3.50, Soy $8.75Futures: Corn $3.47, Soy $8.68


Population2010 2020 2050

(billion) (billion) (billion)World 6.831 World 7.558 World 9.202

China 1.330

China 1.385

India 1.657

India 1.173

India 1.326

China 1.304

U.S. 0.310 U.S. 0.341 U.S. 0.439Indonesia 0.243

Indonesia 0.268

Indonesia 0.313

Brazil 0.201

Brazil 0.223 Ethiopia 0.278

Pakistan 0.177

Pakistan 0.204

Pakistan 0.276

Bangladesh 0.158 Nigeria 0.182 Nigeria 0.264

Nigeria 0.152Bangladesh 0.181

Brazil 0.260

Russia 0.139Russia 0.132

Bangladesh 0.234

Japan 0.127

Mexico 0.125 Congo 0.189

Source: U.S. Bureau of the Census,International Data Base


Liquid Fuel Usage2007 2015 2020 2025 2030 2035

(Million Barrels Oil Equivalent per

Day) (Percent of 2007 Value)

United States 20.6 98% 100% 102% 104% 107%

Canada 2.3 96% 96% 96% 100% 104%

Mexico 2.1 105% 110% 129% 129% 138%

Europe 15.3 92% 88% 88% 89% 90%

Japan 5.0 84% 86% 86% 84% 82%

China 7.6 132% 153% 178% 201% 222%

India 2.8 114% 129% 139% 154% 168%

Africa 3.1 113% 116% 126% 135% 148%

Central and South America 6.0 110% 112% 117% 125% 133%

World 86.1 103% 107% 113% 121% 128%

Source: Energy Information Administration


Crude Oil Prices

Source: Energy Information Administration

0

20

40

60

80

100

120

140

Ja

n-8

6

Ja

n-8

8

Ja

n-9

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Ja

n-9

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Ja

n-9

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Ja

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Ja

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$ p

er

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Price Movements Since 2007

0.5

0.7

0.9

1.1

1.3

1.5

1.7

1.9

2.1

2.31/

3/20

07

3/3/

2007

5/3/

2007

7/3/

2007

9/3/

2007

11/3

/200

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1/3/

2008

3/3/

2008

5/3/

2008

7/3/

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11/3

/200

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1/3/

2009

3/3/

2009

5/3/

2009

7/3/

2009

9/3/

2009

11/3

/200

9

1/3/

2010

3/3/

2010

5/3/

2010

Corn Soybeans Ethanol Gasoline


Price Movements in 2010

0.70

0.80

0.90

1.00

1.10

1.201

/4/2

01

0

1/1

1/2

01

0

1/1

8/2

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5/2

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2/1

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2/2

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5/3

1/2

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0

Corn Soybeans Ethanol Gasoline


Ethanol Margins

Source: ISU, CARD


Ethanol Blending Advantage

-0.04

-0.02

0.00

0.02

0.04

0.06

0.08

0.10

0.12

0.14

0.16

1/3

/20

07

4/3

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/3/2

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00

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4/3

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10

$ p

er

ga

llon


0

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2010 2011 2012

Bill

ion

ga

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s




CropYear

Billion Bushels

2009 4.11

2010 4.43

2011 4.64

2012 4.86


0

5

10

15

20

25

30

35

40

200

9

201

0

201

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201

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201

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Bill

ion G

allo

ns





CARB Fuel Carbon Values

Source: CA Air Resources Board, April 2009


Countries Pursuing BiofuelsUSBrazilArgentinaColombiaParaguayCanadaUruguayMexico

ThailandNew ZealandSouth AfricaSouth KoreaPhilippinesIndonesiaPakistanChina

IndiaMalaysiaAustraliaJapanEURussia

Not a complete list


Government Policies for BiofuelsEthanolAd valorem tariff of 2.5%Import duty of $0.54 per gallonVolumetric Ethanol Excise Tax Credit (VEETC)

$0.45 per gallon starting in 2009

BiodieselBiodiesel Mixture Excise Tax Credit

Expired, may be revived$1.00/0.50 per gallon

CellulosicCellulosic Biofuel Producer Tax Credit

$1.01 per gallon


Cellulosic Biofuel Waiver ProvisionsEPA (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 creditsPrice set at Max($0.25 per gallon, $3.00 –

Average wholesale gasoline price per gallon)


Components of 2007 Energy ActUp 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


Energy in the Farm BillGrants 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


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 materialsFarm program crops, animal byproducts, food

waste, yard waste, algae



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



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


Currently Available Biomass

Source: NREL, 2005


Spectrum of Biofuels

Source: NREL, 2006

Grain/Sugar EthanolBiodieselGreen Gasoline/DieselCellulosic EthanolButanolPyrolysis LiquidsSyngas Liquids

Most Mature

Least Mature


Biofuel ChallengesProduction costs

Conversion, ag. production, etc.Infrastructure barriers

Developing supply chain for biomassContinued development of biofuel

distribution systemGrowth in biofuel-compatible vehicles


Biofuel ChallengesInvestment risks

Higher capital costs, emerging technology

Biomass production shiftsInducing farmers to produce new crops

Consumer understandingAbout the fuelsAbout the tradeoffs


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/

University Extension/Department of Economics Crop and Biofuel Outlook and Issues Agricultural Credit...

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