Dr. Robert Wisner: Grain Outlook 3/15/06
description
Transcript of Dr. Robert Wisner: Grain Outlook 3/15/06
Dr. Robert Wisner: Grain Outlook Dr. Robert Wisner: Grain Outlook 3/15/063/15/06
Iowa State University Extension
Future Size of the Iowa Ethanol Industry 2/07/07
Dr. Robert Wisner, University Professor & Extension Economist
The Corn Market Setting for 2006-07• Second-highest U.S. yield/A. on record• Corn crop 1.3-1.4 billion bushels below
expected demand (2nd year of short-fall vs. demand)
• Corn processing for ethanol to be up 34% from 2005-06
• Plants under construction have 2.13 Bil. Bu. capacity – all should be on line in 16-20 months
• Corn processing increases next 2 years likely 32-40 percent per year (55% of ’06 Crop by 2010)
• Iowa top ethanol producing state• World grain stocks low
Ethanol Economics• $0.10 increase in ethanol price raises break-even Corn price $0.28/bu.• $1.00 rise in corn price increases cost/gal. $0.36• Ethanol prod’n cost $1.30/gal. (Minnesota- @$2 corn)
• Cost increases about $0.36/gal. for each $1 increase in corn
• 1/29/07 ethanol price: $1.91/gal.• December 06 margins: $0.64/gal. (incl.$.51credit)• 1/29/07: Drops to zero @ corn price of about $3.70
corn in IA ($4.10 with USDA costs)• Other variables: DDGS price, Natural Gas
Late Dec. ‘06
1/29/07
Iowa Corn Processing Plants Annual Capacity Operating Plants 970 mil. bu. Expanding Plants 282 New, Under Construction 198 Planned 1,246 Potential total rated capacity 2,761 mil. bu. Equals 137% of 2006 Iowa Corn Crop
1/29/07
Iowa corn processing & ethanol plants, current & planned, 10/26/06
63
Sac
Linn
Lee
Ida
Tama
Clay Kosuth
Jasper
Lyon
Page
Storyr Jones
Fayette
Adair
Bentonn
Wapello
Pocahontas
Osceola
Jefferson
Audubon
Washington
BuenaVista
BlackHawk
Appanoose
CerroGordo
VanBuren
Mucatine
Dickenson
DesMoines
Winnebago
Montgomery
Iowa Corn Processing & Ethanol Plant Locations, Actual & Planned. 9/26/06,
PoweshiekPolk
BooneGreeneCarrollCrawford
Plymouth
O’Brien
Woodbury
Monona
Harrison Shelby
Wright Franklin
Floyd Chickasaw
Webster Hardin
Louisa
Emmet
Palo Alto
Hancock
Worth Mitchell HowardWinneshiek Allamakee
BremerButler
Hamilton GrundyBuchanan
Delaware
Dubuque
Jackson
Clintonn
Guthrie Dallas
Johnson
Marshall
Pottawattamie
Mills
Fremont
Madison
Warren Marion Mahaska
Keokuk
Adams Union Clarke Lucas Monroe
Taylor Ringgold
Cherokee
Calhoun
Decatur Wayne Davis
Henry
Scott
Humboldt
Clayton
Cedar
Sioux
Cass
Iowa*
**
*
*
*
*
* **
*
**
**
*
*
**
**
*
*
**
*
*
*
*
**
**
*
**
*
*
**
*
* * **
Sac
Linn
Lee
Ida
Tama
Clay Kosuth
Jasper
Lyon
Page
Storyr Jones
Fayette
Adair
Bentonn
Wapello
Pocahontas
Osceola
Jefferson
Audubon
Washington
BuenaVista
BlackHawk
Appanoose
CerroGordo
VanBuren
Mucatine
Dickenson
DesMoines
Winnebago
Montgomery
,
PoweshiekPolk
BooneGreeneCarrollCrawford
Plymouth
O’Brien
Woodbury
Monona
Harrison Shelby
Wright Franklin
Floyd Chickasaw
Webster Hardin
Louisa
Emmet
Palo Alto
Hancock
Worth Mitchell HowardWinneshiek Allamakee
BremerButler
Hamilton GrundyBuchanan
Delaware
Dubuque
Jackson
Clintonn
Guthrie Dallas
Johnson
Marshall
Pottawattamie
Mills
Fremont
Madison
Warren Marion Mahaska
Keokuk
Adams Union Clarke Lucas Monroe
Taylor Ringgold
Cherokee
Calhoun
Decatur Wayne Davis
Henry
Scott
Humboldt
Clayton
Cedar
Sioux
Cass
Iowa*
**
*
*
*
*
* **
*
**
**
*
*
**
**
*
*
**
*
*
*
*
**
**
*
**
*
*
**
*
* * **
*
Sac
Linn
Lee
Ida
Tama
Clay Kosuth
Jasper
Lyon
Page
Storyr Jones
Fayette
Adair
Bentonn
Wapello
Pocahontas
Osceola
Jefferson
Audubon
Washington
BuenaVista
BlackHawk
Appanoose
CerroGordo
VanBuren
Mucatine
Dickenson
DesMoines
Winnebago
Montgomery
Iowa Corn Processing & Ethanol Plant Locations, Actual & Planned. 9/26/06,
PoweshiekPolk
BooneGreeneCarrollCrawford
Plymouth
O’Brien
Woodbury
Monona
Harrison Shelby
Wright Franklin
Floyd Chickasaw
Webster Hardin
Louisa
Emmet
Palo Alto
Hancock
Worth Mitchell HowardWinneshiek Allamakee
BremerButler
Hamilton GrundyBuchanan
Delaware
Dubuque
Jackson
Clintonn
Guthrie Dallas
Johnson
Marshall
Pottawattamie
Mills
Fremont
Madison
Warren Marion Mahaska
Keokuk
Adams Union Clarke Lucas Monroe
Taylor Ringgold
Cherokee
Calhoun
Decatur Wayne Davis
Henry
Scott
Humboldt
Clayton
Cedar
Sioux
Cass
Iowa*
**
*
*
*
*
* **
*
**
**
*
*
**
**
*
*
**
*
*
*
*
**
**
*
**
*
*
**
*
* * **
Sac
Linn
Lee
Ida
Tama
Clay Kosuth
Jasper
Lyon
Page
Storyr Jones
Fayette
Adair
Bentonn
Wapello
Pocahontas
Osceola
Jefferson
Audubon
Washington
BuenaVista
BlackHawk
Appanoose
CerroGordo
VanBuren
Mucatine
Dickenson
DesMoines
Winnebago
Montgomery
,
PoweshiekPolk
BooneGreeneCarrollCrawford
Plymouth
O’Brien
Woodbury
Monona
Harrison Shelby
Wright Franklin
Floyd Chickasaw
Webster Hardin
Louisa
Emmet
Palo Alto
Hancock
Worth Mitchell HowardWinneshiek Allamakee
BremerButler
Hamilton GrundyBuchanan
Delaware
Dubuque
Jackson
Clintonn
Guthrie Dallas
Johnson
Marshall
Pottawattamie
Mills
Fremont
Madison
Warren Marion Mahaska
Keokuk
Adams Union Clarke Lucas Monroe
Taylor Ringgold
Cherokee
Calhoun
Decatur Wayne Davis
Henry
Scott
Humboldt
Clayton
Cedar
Sioux
Cass
Iowa*
**
*
*
*
*
* **
*
**
**
*
*
**
**
*
*
**
*
*
*
*
**
**
*
**
*
*
**
*
* * **
*
*
*
* * *
*
*
*
*
66 Planned + current in Iowa11 Just across the borders
*
*
**
Figure 1.
*
*
*
Iowa corn processing & ethanol plants, current & planned, 11/20/06
63
Capacity: 129% of 2006 cropCapacity: 137% of 2006 Crop
Iowa Corn Processing Plants, Current & Planned, 2/02/07
69 Potential Iowa Plants 11 Just across IA Borders
http://www.card.iastate.edu/ag_risk_tools/basis_maps
*Needed corn Acres @ 188 bu./A. state avg. in 2010
**
Existing & Planned U.S. Corn Processing Plants
Blue = OperatingRed = constructionGreen = plannedPink = Expansion of Existing plants
Figure 2.
8/30/06
U.S. Corn Acres Needed, 2007?• Production deficit: 2006 = 1,300 mil. Bu.• New ethanol demand (45-50% of current
construction): 950-1,060 mil. Bu.• Export + feed shrinkage: 350-400 mil. Bu.?• Total short-fall: 1,850 to 1,960 mil. Bu.• Potential carryover decrease, ’07-08: 0.0
• Needed extra harv. acres: 11.6-12.3 Mil. A. @ 160 Bu./A. on all acres (U.S. +13% to +14%)
• Still Leaves Potential Very Tight Supply
With Excellent Weather
Needed Yld. @ current Acres
How Much More Construction to Reach 5.5 Bil. Bu. Corn for Ethanol?
• Estimated 2006-07 corn for ethanol: -- 2.15 Bil. Bu.• Processing capacity under construction: -- 2.13 Bil. Bu.• Plants breaking ground & soon to build: -- 0.3 Bil. Bu. Total: 4.58 Bil. Bu.Capacity yet to break ground to reach 5.5 Bil. Bu.: 0.92 Bil. Bu.Total U.S. Planned & Proposed Plants not Included Above: Approx. 5.9 Bil. Bu.
Potential U.S. DGS demand by 20Potential U.S. DGS demand by 2012
COF @ 20% of ration 7.1 mil. T. Dairy @ 20% of ration 6.13 mil. T. Hogs @15% of ration 6.72 mil. T.Total 19.95 mil.T.
Potential productionPotential production 46.8 Mil. T.
5.5 Bil. Bu for ethanol
With 6.5 bil. Bu.: 51.8 Mil. T
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
U.S. Annual Average Corn Price, 1908-2005
0.00
0.50
1.00
1.50
2.00
2.50
3.00
3.50
4.00
1908
1912
1916
1920
1924
1928
1932
1936
1940
1944
1948
1952
1956
1960
1964
1968
1972
1976
1980
1984
1988
1992
1996
2000
2004
$ Per Bushel
Data Source: USDA/NASS
1908-1942
35 years
Avg $0.78
1942-1972
30 years
Avg $1.26
1973-2005
33 years
Avg $2.37
* Included in Food, Ind. & Seed
Implications of Emerging Energy Market• A lot more corn acres will be needed• Corn prices: increasingly volatile &
weather-sensitive• Basis opportunities will be greater• More storage, handling capacity needed • Winter & spring 2006-07: look for periods of
higher corn, SB prices, strong basis• Cautions about selling 2008 and later crops• Corn, biodiesel to pull bean prices up• Options may be useful in managing risks• Rent & Land Value Implications
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
Key Issues for Agriculture, II• Future transition of corn-ethanol plants to
other feedstocks• Policy issues: import tax, blending credit, LDPs,
CCPs, E-85 vs. E-10, pipeline possibilities, vehicle redesigning, Hydrogen sources
• Global developments: EU biodiesel, Brazil export potential, Asia, S. Africa bioenergy & global grain supply, demand & prices
• Infrastructure needs: grain handling & storage, transportation, ethanol & ddgs transport
• High Prices encourage oil exploration & conservation
Should you shift bean acres to corn?
• Market says yes• How much yield drag?• Impacts of shorter planting & harvest
seasons?• Ability to move, handle, & store more corn?• Soil types?• Availability of top corn seed varieties?
What Could Change These Prospects?
• Accelerated corn yield increases• Crude oil price collapse• Break-through in economical biomass
conversion• Ethanol import tax removed – longer term
impacts• $0.51 blending credit reduced• Declining livestock feeding
Iowa Needs Both Ethanol and Animal Agriculture
• 100 million gallon ethanol plant– 37 million bushels of corn– 80 Iowans directly employed
• 37 million bu corn Direct jobsFarrow-finish 800Or Wean-finish 242Or Beef feedlot 278
Source: Dr. John Lawrence, ISU Extension Economist & Director, Iowa Beef Center