Corn Producers, Ethanol Markets, and Co-Products: When 92 Million Acres is Not Enough Jamey Cline, Director of Biofuels and Business Development
More Corn Per Acre Million Acres Acreage Production Billion Bushels 120 12.4 14 100 12 9.9 10 80 7.9 6.6 8 60 6 3.9 4.2 40 2.8 4 1.8 2.2 20 2 103.9 88.7 82.9 81.4 66.9 84.0 74.2 79.6 88.2 0 0 1930 1940 1950 1960 1970 1980 1990 2000 2010 Source: USDA
210 190 170 150 130 110 90 70 50 Yield History and Trends 2011: 158.7 199.8 185.9 Bushel ls Per Acre 1975 1977 1979 1981 1983 1985 1987 1989 1991 1993 1995 1997 1999 2001 2003 2005 2007 2009 2011 2013 2015 2017 2019 2021 2023 2025 15 Strait Straight 35 Year Linear (Straight 35 Year)
Bushels per acre 200 190 180 170 US CORN YIELD & TRENDS, 1970-2009 PRX_BlueSky_Start_AllNew, GTB-11-04, Apr-08-11 Yield in 2011 needs to return to near trend. 161.4 Share by Stacked Varieties, percent 100 90 80 Stacked Gene Varieties, share of all seeds (USDA-NASS) Actual 160 150 140 130 120 152.8 70 60 50 Actual trend, 1970-2010 PRX adopted trend, 1996-2010 110 40 100 90 30 80 70 60 50 0 70-71 75-76 80-81 85-86 90-91 95-96 00-01 05-06 10-11 15-16 20-21 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 1996-2009, the corn yield trend is increasing at about 2.4 bu/ac per year, vs. 1.9 longer term. 20 10 Adoption of GMO seeds begins in mid- 90s, stacked genes in 2000s, slowed in 2010. Source: PRX
Corn Production Change 11-12 vs. Previous Year Source: PRX
U.S. Corn Markets 2011-12 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
Corn Demand for Feed Corn Corn Displaced by DDG MMT 180 160 140 120 100 80 60 40 20 0 Crop Year 2010 Projected; Source: USDA, ERS; ProExporter Network
Mil Bu 6000 5000 UNITED STATES CORN FED with DDG DISPLACEMENT, 1990-2020 Dry Corn Mill Products05.xls, Mar-23-09 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 2000 1000 0 90-91 95-96 00-01 05-06 10-11 15-16 20-21 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
Estimates of DDGS Replacing Corn 1400 1200 Million Bushel Equivalents 1000 800 600 400 200 0 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 Axis Title Source: PRX
Corn Demand for Export Corn DDG CGF/CGM 80 70 MM MT 60 50 40 30 20 10 0 2010 Projected; Source: USDA, WAOB; Census Bureau
DDGS Market Development: Export Growth - 2002-2010 9000 8500 8000 7500 7000 6000 4969 Metric Tons 5000 4000 U.S. DDGS Exports (in millions) 3920 3000 2000 1000 0 737 967 1229 1779 0 2002 2003 2004 2005 2006 2007 2008 2009 2010 Source: USDA
2007 EISA (Energy Act or RFS2) Source: EPA
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 0 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 Source: RFA
Source: Growth Energy
Is Corn for Ethanol Overestimated? 5.1 5 Ethanol and Co-Products 5.05 4.9 4.95 BilBu 4.8 4.7 4.6 4.5 USDA RFA
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.
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.
Adjustments to USDA
Projected Carry-out 1.8 1.6 1.4 Billion Bus shels 1.2 1 0.8 0.6 0.4 0.2 0 150.8 (-5%) 158.2 (PRX) 158.7 (USDA) 166.6 (+5%) 92.3 mil planted / 84.9 million harvested
How fast? Overcome hurdles Adoption of E15 Source: http://www.towncalleddobson.com/?p=571
Looking Ahead to 2020
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)
Source: 2011 AEO
Informa Baseline Assumptions Long-run corn yields will continue to increase 189 bu/acre in 2020-21 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.
Acreage Planted (Informa Baseline)
Corn S&D (Informa Baseline)
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
Acreage Planted (20 bil gal scenario)
Corn S&D (20 bil gal scenario)
We have a choice
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 (http://www.eia.doe.gov/energyexplained/index.cfm?page=oil_home#tab2) Source: Dr Gregg Carlson, South Dakota State University 32
Thank you!
Reference Slides
UNITED STATES CORN SUPPLY-DEMAND DETAIL, 2010-2019 PRX_BlueSky_Start_AllNew, GTB-11-04, Apr-08-11 Item Unit Crop Year 10-11 11-12 12-13 13-14 14-15 15-16 16-17 17-18 18-19 19-20 Carry-in mil bu 1708 658 738 997 599 671 1601 1447 1216 880 Area planted thou ac 88.2 92.2 91.0 92.0 92.0 91.0 91.0 91.0 91.0 91.0 Area harvested thou ac 81.4 85.2 83.6 84.5 84.9 84.0 84.0 84.0 84.0 84.0 Yield bu/ac 152.8 161.4 164.7 153.8 168.2 188.4 173.6 172.7 176.1 179.2 Production mil bu 12447 13752 13767 12997 14274 15822 14577 14502 14784 15048 Supply mil bu 14169 14420 14515 14003 14883 16503 16188 15959 16011 15938 Carry-out mil bu 658 738 997 599 671 1601 1447 1216 880 895 Disappearance (Use) mil bu 13511 13681 13519 13404 14212 14902 14742 14742 15131 15044 Feed/Residual Use mil bu 5200 5300 5075 4950 5150 5575 5525 5500 5700 5725 Residual use mil bu 822 820 669 534 751 1083 969 902 1011 990 Feed use in state mil bu 4378 4480 4406 4416 4399 4492 4556 4598 4689 4735 Dairy mil bu 783 802 791 793 790 795 800 808 813 821 Beef cattle mil bu 1379 1397 1355 1358 1352 1381 1404 1417 1447 1461 Hogs mil bu 929 951 939 941 938 972 988 997 1024 1034 Poultry mil bu 1191 1232 1223 1226 1221 1246 1266 1278 1306 1319 Other mil bu 96 98 97 97 97 98 98 99 100 101 Processing in state mil bu 6312 6331 6444 6554 6762 6827 6817 6807 6798 6789 Fuel ethanol, wet mill mil bu 481 481 481 481 481 481 481 481 481 481 Fuel ethanol, dry mill mil bu 4441 4451 4553 4654 4847 4896 4874 4853 4831 4810 Total fuel ethanol mil bu 4922 4932 5034 5134 5327 5377 5355 5333 5312 5291 bil gal 13.8 13.9 14.3 14.6 15.2 15.4 15.5 15.5 15.5 15.5 Total Use mil bu 13511 13681 13519 13404 14212 14902 14742 14742 15131 15044 Net Exports to foreign mil bu -2000-2050 -2000-1900 -2300-2500 -2400-2435 -2633-2530 Note. DDG Disposition (na until 06-07), with ruminants 35% ration @ 1.0 feed value of corn; hogs 20% @ 0.8; poultry 5% @ 0.5. DDG production thou mt 35712 35779 36579 37369 38865 39243 39071 38902 38734 38567 Corn displcd by DDG mil bu 1020 1002 1002 994 1013 1008 981 955 929 902 DDG fed to all animals thou mt 26212 25779 25579 25369 25865 25743 25071 24402 23734 23067 DDG net exports thou mt 9500 10000 11000 12000 13000 13500 14000 14500 15000 15500 Corn displcd by DDG &CGF mil bu 1185 1165 1162 1152 1169 1162 1147 1105 1094 1048 PRX BlueSky Outlook, Page 35
Farming looks mighty easy when your plow is a pencil and you're a thousand miles from the corn field. -- Dwight D. Eisenhower