global economic impacts of ethanol industry growth
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Global Economic Impacts of Ethanol Industry Growth. By Dr. Robert Wisner, University Professor of Economics and Coles Professor of International Agriculture Iowa State University Ames, Iowa, U.S.A. Some perspectives. Iowa – the epicenter of biofuels growth The U.S. – rapid expansion & - PowerPoint PPT PresentationTRANSCRIPT
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Global Economic Impacts of Ethanol Industry Growth
By Dr. Robert Wisner, University Professor of Economics and Coles
Professor of International Agriculture
Iowa State University Ames, Iowa, U.S.A.
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Some perspectives
• Iowa – the epicenter of biofuels growth
• The U.S. – rapid expansion & huge agricultural changes
• Brazil – also expanding very rapidly
• Global impacts
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International Impacts• U.S. ethanol plants under construction to use
58 mil. tons of corn (doubling use)– 3.5 times the volume of Japan imports of
U.S. corn– 130% of 2006 EU corn crop– 70% of global corn exports
• Other countries are expanding ethanol & biodiesel
• Strong negative impacts on animal ag.• Sharply higher food costs• Major risk-management challenges in Ag. & bioenergy
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Other Countries with Ethanol Fuels• Canada• China• EU• Thailand
Countries considering ethanol fuels–South Africa–Ukraine–Japan
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Chinese Corn-Ethanol Plant
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U.S. Corn-Ethanol Plant
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U.S. Bioenergy Industries2006-07 growth, 34% annually in ethanol, more rapid in biodieselPrimary feedstocks: corn & soy oilInvestors: farmers, outside firmsBoth political parties strongly support expansion Availability of crop land -- limiting factor Some cellulose-ethanol plants being planned10% ave. U.S. ethanol/gas in 4 yearsMajor implications for livestock & food prices
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New York Crude Oil
Futures Prices
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Corn-ethanol only partial solution to energy challenges
Other feedstocks needed•Municipal wastes•Animal agriculture wastes•Forest product wastes•New crops
New automotive technology•Hybrid gas/electric vehicles•New engine & vehicle designs•Hydrogen fuels & fuel cells
Diversification of energy sourcesIncentives for increased mass transportation Wind power use increasing
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Size of U.S. biofuels industry•121 processing plants•About 75 plants under construction or expanding •About 235 more planned•Processes 20% of U.S. corn crop for motor
fuel•Potential corn for ethanol, Sept. 2007- Aug. 2008: 30% of 2006 crop•High corn prices pull land from other crops
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Products of ethanol industry
•Ethanol•Ethanol yield: 2.75 gal./bu., 410 liters/metric ton of corn•CO2
•Dry Distillers Grain & Solubles (DDGS)•0.3 ton/ton of corn•Protein content: 24-26%•Limited in some amino acids
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73,458 (28,834) (1,834)73,458 (28,834) (1,834)
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Iowa Corn Processing Plants, 2002
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Iowa corn processing & ethanol plants, current & planned, 10/26/06
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66 Planned + current in Iowa11 Just across the borders
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Figure 1.
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Iowa corn processing & ethanol plants, current & planned, 11/20/06
63
Capacity: 129% of 2006 cropCapacity: 140% of 2006 Crop
Iowa Corn Processing Plants, Current & Planned, 5/04/07
70 Potential Iowa Plants 11 Just across IA Borders
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*Needed corn Acres @ 188 bu./A. state avg. in 2010
*** *
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Existing & Planned U.S. Corn Processing Plants
Blue = OperatingRed = constructionGreen = plannedPink = Expansion of Existing plants
Figure 2.
8/30/06
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5.5 Bil. Bu for ethanol
area
bill
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Ethanol Economics• $0.026/liter increase in ethanol price raises break-
even Corn price $11.03/ton• $39.40/ton rise in corn price increases cost/gal.
$0.095/liter • Ethanol prod’n cost $0.318/liter (Univ. of Minnesota-
@$80/ton corn)• May 8,’07 Iowa ethanol price: $0.556/liter• Recent margin: $0.143/liter (34%) (incl.$0.119/liter
subsidy)• Drops to zero @ corn price of about $200/ton in IA
-- up 48-50% from May 4 price• Other variables: DDGS price, Natural Gas • Note: Plant construction costs have risen sharply
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140 Mil. Tons Corn for ethanol
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5.5 Bil. Bu. For Ethanol
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Source of data: USDA, NASS
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Illinois Corn Yields Drought Tolerant?
2004 2005• NW 184 140• NE 174 129 • WEST 192 141• E.SE. 175 139 • SW 158 133• SE 158 130
% chg.
-24
-26
-27
-21
-16
-18
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$ per Gal.
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Mil. Acre shifts to corn: Hay: 1.0 mil CRP: 3.0Coton: 0.6S. Red wheat: 4.3Other wheat: 0.4; oats 1.0
5.5 bil. Gallons of Ethanol
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Implications for U.S. and World Livestock, Poultry & Food Costs
• U.S. supplies 2/3 of world corn exports, 20-25% of wheat & 35-40% of cotton exports
• Costs of livestock & poultry feed to double• Large increase in variability of feed & food
costs• Food aid availability?• Accelerated ag expansion into areas with
fragile eco systems • Shift livestock industries from U.S. to South
America? • Rural employment implications in U.S.
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Infrastructure Needs of bioenergy Market(Time Frame: 3 to 4 years)
Sharp Increases in:• Inputs for corn production• Corn receiving, drying, storage, farm
transporting infrastructure• Efficient rail shipping of ethanol & DDGS• More tank cars for ethanol movement• Electric power generation• Water supply systems• Research on pipelines for ethanol• Retail facilities for E-85, E-20 & E-30 stations
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Environmental Issuesfor Research: ethanol
• Impact on groundwater supplies• Long-term effects, mono-culture ag.• Allowable maximum removal of corn stover & grasseso Soil erosion impactso Soil organic matter impactso Diminished wildlife habitatso Water quality impacts from more fertilizer
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Key Issues for Agriculture• Alternative feedstocks: which ones, how
soon? Biomass, sweet sorghum, sugar beets, high-oil crops, cane sugar, others
• Differential impacts on livestock & poultry species
• Environmental: continuous corn, off-take of biomass, erosion-prone land
• Efficient use of distillers grain, including new uses
• Risk Management: livestock, crops, ethanol
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What Could Change Prospects of Tightening Global Grain Supply?
• Accelerated corn yield increases• Crude oil price collapse• Early break-through in economical cellulose
conversion• U.S.Ethanol import tax removed – longer term
impacts• U.S. $0.51 blending credit reduced or made
variable• Declining global livestock feeding
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http://www.econ.iastate.edu/faculty/wisner/