University Extension/Department of Economics
Crop and Biofuel Outlook and Issues
Agricultural Credit SchoolAmes, Iowa
June 7, 2010
Chad HartAssistant Professor/Grain Markets Specialist
University Extension/Department of Economics
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 ($/bu.) 4.20 4.06 3.60 3.50
University Extension/Department of Economics
U.S. Soybean Supply and Use2007 2008 2009 2010
Area Planted (mil. acres) 64.7 75.7 77.5 78.1
Yield (bu./acre) 41.7 39.7 44.0 42.9
Production (mil. bu.) 2,677 2,967 3,359 3,310
Beg. Stocks (mil. bu.) 574 205 138 190
Imports (mil. bu.) 10 13 15 10
Total Supply (mil. bu.) 3,261 3,185 3,512 3,510
Crush (mil. bu.) 1,803 1,662 1,735 1,640
Seed & Residual (mil. bu.) 93 102 133 154
Exports (mil. bu.) 1,159 1,283 1,455 1,350
Total Use (mil. bu.) 3,056 3,047 3,323 3,144
Ending Stocks (mil. bu.) 205 138 190 365
Season-Average Price ($/bu.) 10.10 9.97 9.50 8.75
Source: USDA
University Extension/Department of Economics
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)
University Extension/Department of Economics
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)
University Extension/Department of Economics
World Corn Production
Source: USDA
University Extension/Department of Economics
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
University Extension/Department of Economics
World Soybean Production
Source: USDA
University Extension/Department of Economics
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
University Extension/Department of Economics
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
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
0%
10%
20%
30%
40%
50%
60%
70%
80%
00
/01
01
/02
02
/03
03
/04
04
/05
05
/06
06
/07
07
/08
08
/09
09
/10
10
/11
11
/12
12
/13
13
/14
14
/15
15
/16
16
/17
17
/18
18
/19
19
/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.
University Extension/Department of Economics
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
University Extension/Department of Economics
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
University Extension/Department of Economics
2009 U.S. Corn Exports
Source: USDA, FAS
Other23%
Taiwan7%
South Korea17%
Egypt5%
Mexico18%
Japan30%
University Extension/Department of Economics
Soybean Export Sales
Source: USDA, FAS
0
300
600
900
1,200
1,500
Week
Mill
ion b
ush
els
2007 2008 2009
University Extension/Department of Economics
2009 U.S. Soybean Exports
Source: USDA, FAS
Mexico7%
Japan5%
Other21%
EU7%
China60%
University Extension/Department of Economics
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
University Extension/Department of Economics
Changing Basis Patterns
University Extension/Department of Economics
Basis Two Years Ago
University Extension/Department of Economics
Basis This Year
University Extension/Department of Economics
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
University Extension/Department of Economics
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
University Extension/Department of Economics
Input Costs
Source: USDA, Agricultural Prices, May 28, 2010
University Extension/Department of Economics
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
University Extension/Department of Economics
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
University Extension/Department of Economics
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
University Extension/Department of Economics
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
University Extension/Department of Economics
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
University Extension/Department of Economics
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
0
Ja
n-9
2
Ja
n-9
4
Ja
n-9
6
Ja
n-9
8
Ja
n-0
0
Ja
n-0
2
Ja
n-0
4
Ja
n-0
6
Ja
n-0
8
Ja
n-1
0
Ja
n-1
2
Ja
n-1
4
Ja
n-1
6
Ja
n-1
8
$ p
er
ba
rre
l
University Extension/Department of Economics
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
7
1/3/
2008
3/3/
2008
5/3/
2008
7/3/
2008
9/3/
2008
11/3
/200
8
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
University Extension/Department of Economics
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
01
0
1/2
5/2
01
0
2/1
/20
10
2/8
/20
10
2/1
5/2
01
0
2/2
2/2
01
0
3/1
/20
10
3/8
/20
10
3/1
5/2
01
0
3/2
2/2
01
0
3/2
9/2
01
0
4/5
/20
10
4/1
2/2
01
0
4/1
9/2
01
0
4/2
6/2
01
0
5/3
/20
10
5/1
0/2
01
0
5/1
7/2
01
0
5/2
4/2
01
0
5/3
1/2
01
0
Corn Soybeans Ethanol Gasoline
University Extension/Department of Economics
Ethanol Margins
Source: ISU, CARD
University Extension/Department of Economics
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
/20
07
7/3
/20
07
10
/3/2
00
7
1/3
/20
08
4/3
/20
08
7/3
/20
08
10
/3/2
00
8
1/3
/20
09
4/3
/20
09
7/3
/20
09
10
/3/2
00
9
1/3
/20
10
4/3
/20
10
$ p
er
ga
llon
University Extension/Department of Economics
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
University Extension/Department of Economics
0
5
10
15
20
25
30
35
40
200
9
201
0
201
1
201
2
201
3
201
4
201
5
201
6
201
7
201
8
201
9
202
0
202
1
202
2
Bill
ion G
allo
ns
Conventional Biofuels Cellulosic Biofuels
Biodiesel Additional Advanced Biofuels
Renewable Fuels Standard (RFS)
University Extension/Department of Economics
CARB Fuel Carbon Values
Source: CA Air Resources Board, April 2009
University Extension/Department of Economics
Countries Pursuing BiofuelsUSBrazilArgentinaColombiaParaguayCanadaUruguayMexico
ThailandNew ZealandSouth AfricaSouth KoreaPhilippinesIndonesiaPakistanChina
IndiaMalaysiaAustraliaJapanEURussia
Not a complete list
University Extension/Department of Economics
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
University Extension/Department of Economics
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)
University Extension/Department of Economics
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
University Extension/Department of Economics
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
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 materialsFarm program crops, animal byproducts, food
waste, yard waste, algae
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
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
University Extension/Department of Economics
Currently Available Biomass
Source: NREL, 2005
University Extension/Department of Economics
Spectrum of Biofuels
Source: NREL, 2006
Grain/Sugar EthanolBiodieselGreen Gasoline/DieselCellulosic EthanolButanolPyrolysis LiquidsSyngas Liquids
Most Mature
Least Mature
University Extension/Department of Economics
Biofuel ChallengesProduction costs
Conversion, ag. production, etc.Infrastructure barriers
Developing supply chain for biomassContinued development of biofuel
distribution systemGrowth in biofuel-compatible vehicles
University Extension/Department of Economics
Biofuel ChallengesInvestment risks
Higher capital costs, emerging technology
Biomass production shiftsInducing farmers to produce new crops
Consumer understandingAbout the fuelsAbout the tradeoffs
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/