Iowa State University

Transcription

1 Impact of Ethanol on Animal Agriculture John D. Lawrence Iowa State University

2 Higher Corn Prices Came at a Good Time Hogs: extended period of positive returns Feedlots Near record weekly prices and new record annual Cowherds: profitable since 1999 and contracting Dairies: rough 2006, but record prices in 2007 Eggs: prices higher in early 2007 following 3+ years of lower price Turkeys: expanding after record prices in 2006

3 Omaha Corn and Decatur SBM $400 $4.50 $350 $4.00 $300 $250 $200 $150 $100 $50 SBM Corn $3.50 $3.00 $2.50 $2.00 $1.50 $1.00 $0.50 $0 $0.00 1/4/2 7/4/2 1/4/2 7/4/2 1/4/2 7/4/2 1/4/2 7/4/2 1/4/2 7/4/2 1/4/2 7/4/

4 Expanding U.S. Ethanol Industry vs Corn Feeding '06-07 Corn for Ethanol Proj. corn For ethanol Other under Constr n n. Proj. Corn ethanol U.S. Corn Feeding U.S. Corn Feeding Potential Corn for Ethanol Other under construction Ethanol Current Corn for Ethanol

5 Implication for Pork Producers Cost of production impact Omaha corn = $2.09 Decature 48% SBM $188 ISM barrows and gilts live weight $42.18 ISU farrow to finish cost estimate $ bu/head, 270# live weight $1 higher corn = $4.44 = $44-45/cwt $2 higher corn = $8.88 = $48-49/cwt

6 Impact on Feedlot Cattle Cost and Returns Price BE Cost Calf $ $71.69 Yearling $90.35 $72.00 Fed $ Bushels and 1250# pay weight $1 higher corn = $4.80/cwt, $8.50 on 7cwt $2 higher corn = $9.60/cwt, $17 on 7cwt

7 20% 18% 16% 14% 12% 10% 8% 6% 4% 2% 0% Cost of Corn as Percent of Total Retail, Hide, and Offal Value Beef Pork % 7.1% Jun % 9.6%

8 Example U.S. DGS demand by % of corn 13.2 mil. T. 25% of corn 8.3 mil. T. 10% of corn 3.0 mil. T. 7% of corn mil. T. Total 25.9 mil. T. Potential production at 5.5 bil. bu. for ethanol 46.8 Mil. T.

9 Midwest DGS Inclusion Rates Percent of Diet Enterprise Range Realistic Adoption Swine Poultry Feedlot Dairy Still need corn for beef and dairy cattle Still need corn and SBM for poultry and hogs For each 1 bushel process to DDGS you need 2 more bushels to feed

10 Chicago DDGS:Corn Price Ratio 01 Jul Jul Jul Jul Jul Jul-06 07

11 NW Iowa Price of Dry, Modified, and Wet Distillers Grains with Solubles Divided id d by the Price of Corn 10/6/ /6/ /6/06 6 1/6/07 2/6/07 3/6/07 4/6/07 Wet Modified Dry 5/6/07 6/6/07

12 Converting Fiber to Ethanol 6/27/2007, POET produces cellulosic ethanol from corn cobs First, the fiber that comes from our fractionation process will provide 40 percent of our cellulosic feedstock from the corn kernels that we are already processing in our facility.

13 Corn Basis to Chicago Cash for Cattle Feeding Regions $0.40 $0.30 Monthly average of daily prices '06-'07 is Jan '06 - May '07 $0.20 $0.10 $0.00 -$0.10 -$0.20 -$0.30 -$ '01-05 '06-07 Iowa OMAHA SWNE Dodge City NECO TX N of TX Triangle Elevators Canadian

14 $0.25 Corn Price Difference, Average Ethanol Bids Minus Elevator Bids, Northeast and Northwest Iowa $0.20 $0.15 $0.10 $0.05 $- $(0.05) $(0.10) Northeast t Iowa Northwest t Iowa Oct Nov Dec Jan Feb Mar Apr May Jun

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17 Risk Implications Physical control Enough for 08, what about 09 Ethanol expansion continues Other crops try to buy back acres Basis volatility 20% more corn to harvest and store Carry in the market Location basis variability

18 Rural Communities Needs Both Ethanol and Livestock 100 million gallon ethanol plant 37 million bushels of corn people directly employed 37 million bu corn Direct jobs Farrow-finish 800 Or Wean-finish 242 Or Beef feedlot 278 Further processing employment??

19 Take-home points Much tighter feed energy supply than in past Increased supply of medium-protein DGS Soy meal: tighter supply & higher cost Differential economic impacts by species of livestock & poultry High risk to livestock industry in short-crop years Feed price volatility affected by govt. fuel mandates 2 nd generation ethanol plants to tighten DGS, forage supplies (8-10 years out?)

20 Iowa Corn Processing Plants, 2002 Lyon Osceola Dickinson Emmet Winnebago Worth Mitchell Howard Kossuth Sioux O'Brien Clay Palo Alto Hancock Cerro Gordo Floyd Chickasaw Winneshiek Allamakee Plymouth Cherokee Buena Vista Pocahontas Humboldt Wih Wright Franklin Butler Bremer Fayette Clayton Woodbury Ida Sac Calhoun Webster Hamilton Hardin Grundy Black Hawk Buchanan Delaware Dubuque Monona Crawford Carroll Greene Boone Story Marshall Tama Benton Linn Jones Jackson Clinton Harrison Shelby Audubon Guthrie Dallas Polk Jasper Poweshiek Iowa Johnson Cedar Scott Muscatine Pottawattamie Cass Adair Madison Warren Marion Mahaska Keokuk Washington Louisa Mills Montgomery Adams Union Clarke Lucas Monroe Wapello Jefferson Henry Des Moines Fremont Page Taylor Ringgold Decatur Wayne Appanoose Davis Van Buren Lee

21 Plymouth Potential Planned + Iowa current Plants in Iowa 11 Just across the IA Borders borders Lyon Emmet Osceola Dickenson Winnebago Worth Mitchell HowardWinnesh iek Allamakee Clay Sioux O Brien Palo Kosuth Hancoc Floyd CerroGordo Chickasaw Alto Fayette k Clayton Cherokee Humbol BuenaVista Pocahontas Butler dt Wright Franklin Bremer Dl Woodbury Ida Sac Webster Hamilton BlackHawk Buchana Delawa Calhoun Hardin Grundy n re Tama Linn Crawford Story r Benton n Jones Monona Carroll Greene Boone Marshal l Audubon Poweshiek Cedar Harrison Shelby Guthrie Dalla Polk Jasper Iowa Johnson s Mucatine Pottawattamie Washington Adair Madis Warren Cass Marion Mahask Keokuk on a Louisa Mills Montgomery Adams Union Clarke Lucas Monroe Wapello Jefferson Des Moines Henry Fremont Page Taylor Ringgold Decatur Wayne Davis Figure 1. Appanoose VanBuren Lee Capacity: 142% 129% of 2006 crop Crop Dubuque Jackson Clinton n Iowa Iowa Corn corn Corn Processing processing Processing & Ethanol & ethanol Plants, plants, Current Locations, current & Actual Planned, & planned, & Planned. 5/30/07, 10/26/06 11/20/06 9/26/06 Scott

22 Take Home The world in which you operate had fundamentally changed. How have you changed your business???

23 Thank you! Any Questions? t /l /