Corn Producers, Ethanol Markets, and Co-Products: Jamey Cline, Director of Biofuels and Business Development

Transcription

1 Corn Producers, Ethanol Markets, and Co-Products: When 92 Million Acres is Not Enough Jamey Cline, Director of Biofuels and Business Development

2 More Corn Per Acre Million Acres Acreage Production Billion Bushels Source: USDA

3 Yield History and Trends 2011: Bushel ls Per Acre Strait Straight 35 Year Linear (Straight 35 Year)

4 Bushels per acre US CORN YIELD & TRENDS, PRX_BlueSky_Start_AllNew, GTB-11-04, Apr Yield in 2011 needs to return to near trend Share by Stacked Varieties, percent Stacked Gene Varieties, share of all seeds (USDA-NASS) Actual Actual trend, PRX adopted trend, CORN YIELD TREND ACCELERATING OVER PAST 15 YEARS After (1) Freedom to Farm in 1996, (2) Beginning adoption of GMO seeds in mid-1990s (and then stacked traits), and (3) Relatively benign weather , the corn yield trend is increasing at about 2.4 bu/ac per year, vs. 1.9 longer term Adoption of GMO seeds begins in mid- 90s, stacked genes in 2000s, slowed in Source: PRX

5 Corn Production Change vs. Previous Year Source: PRX

6 U.S. Corn Markets crop projection, 336 MMT total Use Feed 37% Other Food, Industr ial 6% HFCS 4% Export 14% DDG Displacement 9% Ethanol 30% 35 MMT Distiller Grains Source: PRX

7 Corn Demand for Feed Corn Corn Displaced by DDG MMT Crop Year 2010 Projected; Source: USDA, ERS; ProExporter Network

8 Mil Bu UNITED STATES CORN FED with DDG DISPLACEMENT, Dry Corn Mill Products05.xls, Mar DDG "Potential Consumption" Assumptions Animal Share Corn Type ration Replcmt ratio Dairy 35% 1.0 Beef cattle 35% 1.0 Hogs 20% 0.8 Poultry 5% 0.5 Other 5% 0.5 Animal numbers decline, then grow with population. Corn displaced by DDG & CGF fed Other Poultry 4000 Hogs Beef 3000 Dairy CORN FEED USE DECLINES WITH DDG DISPLACEMENT Corn feed use in current Blue Sky model assumes that some 2/3 rds of DDG production will displace corn in livestock feeding, rising to nearly 20 % of total fed. Source: PRX

9 Estimates of DDGS Replacing Corn Million Bushel Equivalents Axis Title Source: PRX

10 Corn Demand for Export Corn DDG CGF/CGM MM MT Projected; Source: USDA, WAOB; Census Bureau

11 DDGS Market Development: Export Growth Metric Tons U.S. DDGS Exports (in millions) Source: USDA

12 2007 EISA (Energy Act or RFS2) Source: EPA

13 Ethanol Production Increasing 14,000 12,000 10,000 8,000 6,000 4,000 2,000 Million gallons 2010: 13.2 million gallons produced Source: RFA

14 Source: Growth Energy

15

16 Is Corn for Ethanol Overestimated? Ethanol and Co-Products BilBu USDA RFA

17 Corn for Feed and Ethanol 5.0 Billion Bushels 1.2 bilbu 1.4 bilbu USDA Estimate of Corn for Feed and Residual Distillers Grains Corn Feed Equivalence Exported Corn Used as Feed 5.05 Billion Bushels Total USDA Estimate of Corn for Ethanol, Dist illers Grains, Corn Oil and Other Ethanol Coproducts Numbers based on July 2011 WASDE report and PRX estimate of distillers grains; export amount represents estimated 75% of exported corn that will be used as feed.

18 Corn for Feed and Ethanol 5.0 Billion Bushels 1.2 bil 1.5 bil USDA Estimate of Corn Used for Feed and Residual Distillers Grains Corn Feed Equivalence Exported Corn Used as Feed 5.05 Billion Bushels Total USDA Estimate of Corn for Ethanol and Distillers Grains 3.85 Billion Bushels Total USDA Estimate of Corn for Ethanol, Exc luding Distillers Grains Corn Feed Equivalence (5.1 minus 1.2) Numbers based on USDA s July 2011 WASDE report and PRX estimate of distillers grains. Export amount represents estimated 80% of exported corn that will be used as feed.

19 Adjustments to USDA

20 Projected Carry-out Billion Bus shels (-5%) (PRX) (USDA) (+5%) 92.3 mil planted / 84.9 million harvested

21 How fast? Overcome hurdles Adoption of E15 Source:

22 Looking Ahead to 2020

23 New Demand Growth in Corn for Ethanol slows USDA WASDE: 10/11: 5.05 est. 11/12: 5.15 est. 10/11: 13.2 bgy~ 4.76 bbu (2.77 gpb) Now: 4.9 bbu(informa) 2020: 5.3 bbu(informa)

24 Source: 2011 AEO

25 Informa Baseline Assumptions Long-run corn yields will continue to increase 189 bu/acre in Ethanol demand capped at 15 bil gallons per year (RFS II) CA LCFS will 1 st push Midwest corn ethanol from state and later dramatically reduce all ethanol use in State China corn imports will increase (modestly) Increasing production, and capped demand will cause stocks to rise and acreage to eventually shift away from corn to soybeans.

26 Acreage Planted (Informa Baseline)

27 Corn S&D (Informa Baseline)

28 20 Billion Gallon Scenario Allowing higher volumes of conventional ethanol to count toward RFS II is important because of the a shortfall in the volume of cellulosic biofuel that is commercially available 20 billion gallons is approximately equivalent to full nationwide adoption of E-15 Additional gallons over RFS II will phase in over time after 2015

29 Acreage Planted (20 bil gal scenario)

30 Corn S&D (20 bil gal scenario)

31 We have a choice

32 What is the effect on Consumers? 378 million gallons -Daily Consumption of gasoline 1 Cost Savings of $0.89 per gallon (U of WI, Iowa State) Ethanol is saving the American gas consumer approximately $330,000,000 per day. Additionally, ethanol displaces/substitutes for gasoline sales American gas consumers purchase ~ 36 mg of ethanol per day Additional loss of more than $100,000,000 per day of lost oil sales In short, ethanol is costing the oil industry about $430,000,000 per day in profits and sales So where is ethanol s negative publicity coming from? You be the judge. 1 ( Source: Dr Gregg Carlson, South Dakota State University 32

33 Thank you!

34 Reference Slides

35 UNITED STATES CORN SUPPLY-DEMAND DETAIL, PRX_BlueSky_Start_AllNew, GTB-11-04, Apr Item Unit Crop Year Carry-in mil bu Area planted thou ac Area harvested thou ac Yield bu/ac Production mil bu Supply mil bu Carry-out mil bu Disappearance (Use) mil bu Feed/Residual Use mil bu Residual use mil bu Feed use in state mil bu Dairy mil bu Beef cattle mil bu Hogs mil bu Poultry mil bu Other mil bu Processing in state mil bu Fuel ethanol, wet mill mil bu Fuel ethanol, dry mill mil bu Total fuel ethanol mil bu bil gal Total Use mil bu Net Exports to foreign mil bu Note. DDG Disposition (na until 06-07), with ruminants 35% 1.0 feed value of corn; hogs 0.8; poultry 0.5. DDG production thou mt Corn displcd by DDG mil bu DDG fed to all animals thou mt DDG net exports thou mt Corn displcd by DDG &CGF mil bu PRX BlueSky Outlook, Page 35

36 Farming looks mighty easy when your plow is a pencil and you're a thousand miles from the corn field. -- Dwight D. Eisenhower