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Department of Economics
Trends & Issues in Agriculture
2009 Nationwide Agribusiness Annual CommercialPolicyholder Conference
Des Moines, IowaAugust 20, 2009
Chad HartAssistant Professor/Grain Markets Specialist
Department of Economics
Increased Volatility Will Remain in Agriculture
Department of Economics
Outside Influences (Jan. 2007 = 1)
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Dow Oil Corn Soybeans
Department of Economics
Input Costs
Source: USDA, Agricultural Prices, July 31, 2009
Department of Economics
Ammonia Prices
Source: http://www.fertilizerworks.com/html/market/TheMarket.pdf
Department of Economics
Outside Influences (Jan. 2009 = 1)
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Department of Economics
Agriculture’s Market Reach Is Expanding
Department of Economics
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Bill
ion G
allo
ns
Conventional Biofuels Cellulosic Biofuels
Biodiesel Additional Advanced Biofuels
Renewable Fuels Standard (RFS)
60% GHG Emission Reduction
50% GHG Emission Reduction
20% GHG Emission ReductionIf construction started after Dec. 2007
Department of Economics
BiomassWind
Solar
Alternative Sources
Department of Economics
Bio-based Market Opportunities
Source: Informa Economics, Biobased Multi-Client Study, March 2006
Department of Economics
Biobased Pathways
Source: USDA, 2008, U.S. Biobased Products: Market Potential and Projections Through 2025
Department of Economics
Dept. of Energy Projections
Source: Energy Information Administration,Annual Energy Outlook 2009
Department of Economics
The U.S. Is Taking A More “Global” Approach To Issues
Department of Economics
Draft Lifecycle GHG Reductions
Source: EPA, May 2009
Department of Economics
CARB Fuel Carbon Values
Source: CA Air Resources Board, Summer 2009
Department of Economics
Climate Change Legislation
Source: Congressional Research Service
American Clean Energy and Security Act of 2009 (H.R. 2454)• Requires utilities to supply an increasing percentage of their demand
from a combination of energy efficiency savings and renewable energy (6% in 2012, 9.5% in 2014, 13% in 2016, 16.5% in 2018, and 20% in 2021-2039).
• Provides for issuing, trading, banking, retiring, and verifying renewable electricity credits.
• Establishes targets to cap and reduce greenhouse gas (GHG) emissions, annually, so that GHG emissions from capped sources are reduced to 97% of 2005 levels by 2012, 83% by 2020, 58% by 2030, and 17% by 2050; and establish a federal GHG registry.
• Provides for trading, banking and borrowing, auctioning, selling, exchanging, transferring, holding, or retiring emission allowances.
Department of Economics
Climate Change Legislation
Source: Craig Raysor, Gillon & Associates, PLLC
Agriculture provisions in the bill• Provides some exemptions from the GHG emission reduction
requirements for agriculture and forestry
• Provides incentive-based approach to GHG emission reduction/capture
• Allows USDA to help establish eligible GHG offset practices and review of those practices
• Shifts question on indirect-land-use to an independent panel for study with EPA and USDA to review in the future (with a rule to be in place 6 years after passage)
• Allows for a specific exemption for livestock (enteric fermentation from ruminant animals) from uncapped emissions guidelines
Department of Economics
Climate Change Legislation
Source: USDA, Office of Chief Economist“A Preliminary Analysis of the Effects of HR2454 on U.S. Agriculture”
Department of Economics
Climate Change Legislation
Source: Ben Lieberman, Heritage Foundation, July 21, 2009
“Since farming is energy intensive, it will be hit hard by Waxman-Markey's energy price hikes. In addition to higher diesel fuel and electricity costs, prices for natural gas-derived fertilizers and other chemicals will also rise. Everything else affecting agriculture, from the cost of constructing farm buildings to the price of tractors and other farm equipment, will also go up. Consequently, farm profits are expected to decline by 28 percent in 2012 and will be an average 57 percent lower from 2012-2035.”
Department of Economics
Climate Change Legislation
Source: Rep. Collin Peterson (D-MN), Hutchinson (MN) Leader, July 23, 2009
“Ultimately, greenhouse gas emissions are probably going to be regulated, whether Congress acts or not. In 2007, the Supreme Court ruled that the Environmental Protection Agency has the authority under the Clean Air Act to regulate greenhouse gas emissions if they are found to endanger public health or welfare. The Supreme Court required EPA to determine if they are a public health hazard or not, and earlier this year, the EPA put out a proposed finding that says greenhouse gas emissions are a danger to public health and welfare.”
Department of Economics
But The World Keeps On Growing
Department of Economics
Population2008 2020 2050
(billion) (billion) (billion)World 6.678 World 7.601 World 9.393
China 1.330
China 1.431
India 1.808
India 1.148
India 1.362
China 1.424
U.S. 0.304 U.S. 0.336 U.S. 0.420Indonesia 0.238
Indonesia 0.268
Nigeria 0.357
Brazil 0.192
Brazil 0.212
Indonesia 0.313
Pakistan 0.168
Pakistan 0.204
Bangladesh 0.280
Bangladesh 0.154
Bangladesh 0.190
Pakistan 0.278
Russia 0.141
Nigeria 0.184
Brazil 0.228
Nigeria 0.138
Russia 0.132 Congo 0.189
Japan 0.127
Mexico 0.125
Mexico 0.148
Source: U.S. Bureau of the Census,International Data Base
Department of Economics
Liquid Fuel Usage2006 2010 2015 2020 2025 2030
(Million Barrels Oil Equivalent per
Day) (Percent of 2006 Value)
United States 20.7 95% 98% 98% 100% 105%
Canada 2.3 100% 100% 100% 104% 109%
Mexico 2.1 71% 81% 90% 95% 100%
Europe 15.7 92% 92% 95% 96% 96%
Japan 5.2 88% 92% 96% 92% 90%
China 7.2 118% 139% 168% 192% 213%
India 2.7 89% 115% 144% 159% 174%
Africa 3.0 117% 120% 123% 127% 130%
Central and South America 5.7 116% 116% 119% 125% 133%
World 85.0 102% 107% 113% 119% 125%
Source: Energy Information Administration
Department of Economics
Countries Pursuing BiofuelsUSBrazilArgentinaColombiaParaguayCanadaUruguayMexico
ThailandNew ZealandSouth AfricaSouth KoreaPhilippinesIndonesiaPakistanChina
IndiaMalaysiaAustraliaJapanEURussia
Not a complete list
Department of Economics
Spectrum of Biofuels
Source: NREL, 2006
Grain/Sugar EthanolBiodieselGreen Gasoline/DieselCellulosic EthanolButanolPyrolysis LiquidsSyngas Liquids
Most Mature
Least Mature
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
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
Department of Economics
A Long-Term Outlook on Agriculture
Department of Economics
Average Annual GDP Growth, 2008-2018
Source: FAPRI 2009 Outlook
Department of Economics
Average Annual Exchange Rate Change, 2008-2018
Source: FAPRI 2009 Outlook
Department of Economics
U.S. Crop Planted Area, 1998-2018
Source: FAPRI 2009 Outlook
Department of Economics
U.S. Crop Prices, 1998-2018
Source: FAPRI 2009 Outlook
Department of Economics
U.S. Crop Inputs, 1998-2018
Source: FAPRI 2009 Outlook
Department of Economics
U.S. Livestock Production, 1998-2018
Source: FAPRI 2009 Outlook
Department of Economics
U.S. Livestock Prices, 1998-2018
Source: FAPRI 2009 Outlook
Department of Economics
U.S. Farm Income, 1998-2018
Source: FAPRI 2009 Outlook
Department of Economics
World Wheat Trade, 2000-2018
Source: FAPRI 2009 Outlook
Department of Economics
World Corn Trade, 2000-2018
Source: FAPRI 2009 Outlook
Department of Economics
World Soybean Trade, 2000-2018
Source: FAPRI 2009 Outlook
Department of Economics
World Meat, 2000-2018
Source: FAPRI 2009 Outlook
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/