Overview of the US Biodiesel Industry and Summary · Overview of the US Biodiesel Industry and...
Transcript of Overview of the US Biodiesel Industry and Summary · Overview of the US Biodiesel Industry and...
Overview of the US Biodiesel
Industry and Summary
By John Kruse, PhD
Principal and Directory of Quantitative Analysis
Email: [email protected]
October 26, 2015
WAEES Scenario Analyses (2015)
Scenario Analysis1. RFS 2 Policy
- Volume Obligations
- Biodiesel
- Ethanol
- Advanced
- Tax credits
- Ethanol blend wall issues
2. International Policy
- Argentina Policy
- Brazil Policy
- EU-28 Biofuels Policy
3. Biofuels Technology
- Feedstock Conversion
- Renewable Diesel
4. Crude oil prices
5. Biofuels Feed Stocks
- Supply Availability
- Yield growth
- Production shocks
- New sources
- Market changes
- Technology
6. International supply shocks
- Ukraine disturbance
- South America yields
- US yields
7. International demand shocks
- China feed demand
- Africa meat & feed consumption
- Calorie consumption
WAEES Global Partial
Equilibrium Modeling System
8. Trait & Technology Analysis
- Valuation of GE crops
- Impacts of labeling GE foods
- Impact of new trait introduction
WAEES has run over 50 biofuels specific scenarios in 2015 as of the end of September
Over 20,000 equations
Commodity Coverage Corn
Sorghum
Barley
Wheat
Rice
Cotton
Soybeans & Derivatives
Sunflowers & Derivatives
Rapeseed & Derivatives
Palm Oil
Sugarcane, Sugar Beets, & Sugar
Biodiesel
Ethanol
Cattle
Hogs
Beef
Pork
Broilers
Dairy & Dairy Products(Quasi Trend Model)
Concept Coverage Supply Components
Crops: Area, Yield, Production, Imports, Beginning Stocks
Livestock: Breeding Herd, Market Animals, Calf Crop, Pig Crop, Slaughter Weight, Production, Imports,
Beginning Stocks
Biofuels & RINs: Capacity, Capacity Utilization, Production, Imports, Beginning Stocks
Demand Components
Crops: Food, Feed, Industrial, Exports, Ending Stocks
Livestock: Slaughter, Death Loss, Food Use, Exports, Ending Stocks
Biofuels & RINs: Consumption, Exports, Ending Stocks
Commodity Prices (except dairy)
Regional Crop Costs of Production for the United States, Brazil, Argentina, China, and India
Assumptions used regarding Real GDP Growth, Population, Inflation, Exchange Rates,
Crude Oil Prices, and Policy.
Geographic Coverage of the WAEES Agricultural
& Biofuels Partial Equilibrium Models (USDA Regions)
North America
• US
• Canada
• Mexico
Central America & the
Caribbean
South America
• Argentina
• Bolivia
• Brazil
• Chile
• Paraguay
• Uruguay
• Other South America
The European Union (28 countries)
Area, yield, production individual countries
Other Europe
Former Soviet Union
• Russia
• Ukraine
• Uzbekistan
• Other Former Soviet Union
Middle East
• Iran
• Saudi Arabia
• Turkey
• Other Middle East
East Asia
• China
• Japan
• South Korea
• Taiwan
• Other East Asia
South Asia
• Bangladesh
• India
• Pakistan
• Other South Asia
Southeast Asia
• Indonesia
• Malaysia
• Myanmar
• Philippines
• Thailand
• Vietnam
• Other Southeast Asia
Oceania
• Australia
• Other Oceania
North Africa
• Egypt
• Other North Africa
Sub-Saharan Africa
• Kenya
• Nigeria
• South Africa
• Other Sub-Saharan Africa
Partial Equilibrium Modeling System(Conceptual Framework Representation for One Country)
Crop Feed Demand
Crop Food Demand
Per Capita Income
& Distribution
Other Crop Demand
Population
Age Distribution &
Health Concerns
Cultural Tastes &
Preferences
Meat Food Demand
Biofuels Demand
Fuel
Fertilizer
Chemical
Machinery
Crop
Prices
Area
Harvested
Yield
Seed
Land
Transport
Labor
Interest
Crop Cost
of
Production
Veterinary
Feed
Meat
Prices
Market
Animals
Livestock
Cost of
Production
Breeding
Herd
Government
Policy
Technology
Inflation
Exchange Rates Conditioning Assumptions
Crop Supply & Demand
Livestock Supply & Demand
Data SourcesMacroeconomic Real GDP, Inflation: IMF through 2019, WAEES
thereafter
Population: United Nations
Exchange Rates: WAEES model based on IMF
forecast of real GDP, inflation, and other factors
Crude oil and other energy prices: U.S. Department of
Energy, Energy Information Administration (EIA)
Ag Commodity Supply & Demand USDA PS&D Database, ERS, & NASS (90%)
FAO Database
Eurostat (EU-28 by country supply data)
USDA Gain Reports
Country Ministries of Ag
Policies & Tariffs USDA FSA & USDA GAIN Reports
Country Ministries of Agriculture
WTO
OECD
European Commission
Ag Commodity Prices USDA ERS & NASS
Eurostat
Various spot markets
The Jacobsen
Biofuels US Supply & Demand: EIA, EPA EMTS Data, and
ERS-FATUS
US Prices: USDA AMS, Nebraska Government
Website, The Jacobsen
Int’l Supply & Demand: USDA Gain Reports,
European Biodiesel Board, European Commission,
Argentine Institute of National Statistics and
Census(INDEC),
Int’l Prices: Argentine Secretary of Energy, Center for
Advanced Studies on Applied Economics (CEPEA-
Brazil), USDA Gain Reports, The Jacobsen
US Biofuels RIN Models
D6 RIN Volume
Obligation
D6 RIN Ending
Stocks
D6 RIN
Price
Domestic D6 RIN
Production
Carryover RIN
stocks
Imported D6 RIN
Production
Demoted D5 RINs
Supplied
D5 RIN Volume
Obligation
D5 RIN
Carryover Stocks
D5 RIN
Price
Domestic D5 RIN
Production
Carryover RIN
stocks
Imported D5 RIN
Production
Demoted D4 RINs
Supplied
D5 RINs Demoted
to D6 RINs
D4 RIN Volume
Obligation
D4 RIN
Carryover Stocks
D4 RIN
Price
Domestic D4 RIN
Production
Carryover RIN
stocks
Imported D4 RIN
Production
D4 RINs Demoted
to D5 RINs
D3 RIN Volume
Obligation
D3 RIN
Price
Domestic D3 RIN
Production
Imported D3 RIN
Production
Imported
Sugarcane Ethanol
Renewable Diesel
Adv Sorghum Ethanol
Renewable Diesel
Biogas
Naptha
Heating Oil
Compressed Gas
Dom Sugarcane Ethanol
Butanol
Biodiesel
Renewable Diesel
Butanol
Corn Ethanol
Renewable Diesel
US Biofuels Partial Equilibrium Models For Ethanol & Biodiesel
High Blend
Use
Total
Supply
Ethanol
Production
Ending
Stocks
Low Blend
UseExports
Ethanol
Price
ImportsBeginning
Stocks
Exports
Total
Supply
Biodiesel
Production
Ending
StocksFuel Use
Biodiesel
Price
ImportsBeginning
Stocks
Corn Ethanol Biodiesel
CapacityCapacity
UtilizationCapacity
Capacity
Utilization
Conventional
MandateMarketBiodiesel
MandateMarket
Glycerin
ProductionDistillers’ Grains
Production
Corn Oil
Production
Processing
Margin
Ethanol
Price Corn Price
Processing
Margins
Biodiesel
Price
#2 Diesel
Price
Glycerin
Price
Feed Stock
Prices
Technology
DDG Price
DDG Corn
Oil Price
Other Costs
Unleaded
Gasoline
Price
Crude Oil
Price
Conventional
RIN Price
Biodiesel RIN
Price
Advanced
RIN Price
Brazil Ethanol
Price
Brazil Ethanol
Supply
World Sugar
Price
Brazil Ethanol
Demand
Cellulosic RIN
Price
Sorghum
Ethanol
US Biofuel Feedstock Sources
Sugarcane
Ethanol
Production
Corn
Biodiesel
Production
Renewable Diesel
Production
Soybean Oil
Cellulosic
Biomass
Butanol
Production
Sorghum
Canola Oil
DDG Corn Oil
Inedible Tallow
White Grease
Brown Grease
Poultry Fat
Palm Oil
Heating Oil
Naptha
Landfill Waste
ManagementBiogas
Animal Waste
Management
Compressed Gas
Yellow Grease
Boxes with a dashed outline
are included in the WAEES
biofuels model as
assumptions.
Yellow Grease Market Structure
Yellow
Grease Price
Yellow Grease
Imports
Yellow Grease
Supply
Yellow Grease
Methyl Ester
Use
Yellow
Grease
Feed Use
Yellow
Grease
Ending Stocks
Yellow Grease
Beginning Stocks
Yellow Grease
Production
Yellow Grease
Exports
Frying Oil UseHigh FFA Animal
Fats
Dashed lines indicate that data is
not specifically reported
Hog Fat Market Structure
Food UseInedible
Use
Lard Supply
Lard Production
(Edible Hog Fat)
White Grease Production
(Inedible Hog Fat)
Beginning
Stocks
Ending
Stocks
Hog
Slaughter
Lard Price
Imports
Other
Industrial Use
Methyl Ester
Use
Exports
White
Grease Price
White Grease
Imports
White Grease
Supply
White Grease
Methyl Ester
Use
White
Grease
Exports
White
Grease
Feed Use
White Grease
Ending Stocks
White Grease
Beginning Stocks
White Grease
Oleo Chemical
Use
Dashed lines indicate that data is not specifically
reported. Data availability has not been updated to
reflect new USDA “Fat and Oils: Oilseed Crushings,
Production, Consumption, and Stocks” report
SCENARIO ANALYSIS
RFS Volume Obligation AssumptionsBaseline and Scenarios
Calendar Year 2014 2015 2016 2017 2018
billion gallons
Baseline - EPA Proposed Rule (May 2015)
Overall RFS 15.930 16.300 17.400
Conventional Gap (Implied Ethanol) 13.250 13.400 14.000
Advanced 2.680 2.900 3.400
Biodiesel 1.630 1.700 1.800 1.900
Cellulosic 0.033 0.106 0.206
Advanced Gap 0.120 0.159 0.404
California CARB (sugarcane ethanol)* 0.120 0.180 0.240
NBB: Minimum Biodiesel Volume Obligations
Overall RFS 15.930 16.300 18.000 18.000 18.000
Conventional Gap (Implied Ethanol) 13.250 13.400 14.000 14.000 14.000
Advanced 2.680 2.900 4.000 4.000 4.000
Biodiesel 1.630 1.700 2.000 2.300 2.300
Cellulosic 0.033 0.106 0.206 0.256 0.306
Advanced Gap 0.120 0.159 0.694 0.179 0.129
California CARB (sugarcane ethanol) 0.120 0.180 0.240 0.300 0.360
* WAEES Assumption, not specified by EPA
The $1 blenders credit is
not assumed to continue
beyond 2014 in both the
baseline and NBB
scenario.
Crude Oil PriceWest Texas Intermediate
0
20
40
60
80
100
120
2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
No
min
al D
olla
rs P
er
Bar
rel
US DOE-EIA April 14, 2015 Energy Outlook US DOE-EIA May 2014 Energy Outlook
US Soybean YieldsNBB vs USDA, Feb 2011 Projections
0
10
20
30
40
50
60
2011 2012 2013 2014 2015
Bu
shel
s P
er A
cre
NBB Forecast USDA Forecast Actual
US Soybean Production and Harvested Area
68
70
72
74
76
78
80
82
84
86
1.5
2.0
2.5
3.0
3.5
4.0
4.5
201
0
201
1
201
2
201
3
201
4
201
5
201
6
201
7
Mil
lio
n A
cre
s
Bil
lio
n B
ush
els
USDA Production* NBB Production
USDA Harvested Area* NBB Harvested Area
* USDA estimates based on June 2015 WASDE for 2015, and the 2015 USDA Baseline thereafter.
Extraction of corn oil from DDG’s
0.00
0.10
0.20
0.30
0.40
0.50
0.60
0.70
0.80
0.90
1.00
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
201
0
201
1
201
2
201
3
201
4
201
5
201
6
201
7
201
8
Po
un
ds o
f o
il p
er
bu
sh
el
Perc
en
t
Share of DDG's with corn oil extracted Corn oil extraction rate from DDG's
DDG Corn Oil Production (Oct/Sep MY)(NBB Forecast vs Actual)
26402761
0
500
1000
1500
2000
2500
3000
Actual* NBB Projected**
Mill
ion
Po
un
ds
* Actual numbers based on USDA’s “Grain Crushings and Co-Products Production” reports, monthly data
for 11 months adjusted to annual.
** NBB projections as of July 2015.
DDG Corn Oil Production and UseMinimum Scenario – Marketing Year
0.0
0.5
1.0
1.5
2.0
2.5
3.0
3.5
4.0
4.5
10/11 11/12 12/13 13/14 14/15 15/16 16/17 17/18 18/19
Bill
ion
Po
un
ds
Biodiesel Use Feed Use DDG corn oil production
SCENARIO RESULTS
US Biodiesel Production & ImportsMinimum Scenario – Calendar Year
0
500
1,000
1,500
2,000
2,500
3,000
2014 2015 2016 2017
Mill
ion
Gal
lon
s
Methyl Ester Production Methyl Ester Imports
Renewable Diesel Production Renewable Diesel Imports
US Methyl Ester Production By Feedstock SourceMinimum Scenario – Oct/Sep Marketing Year
0
200
400
600
800
1,000
1,200
1,400
1,600
1,800
13/14 14/15 15/16 16/17
Mill
ion
Gal
lon
s
Soybean Oil Corn Oil Canola Oil Inedible Tallow White Grease
Yellow Grease Brown Grease Poultry Fat Other
Biodiesel Plant PricesMinimum Scenario – Calendar Year
0.00
1.00
2.00
3.00
4.00
5.00
6.00
2010 2011 2012 2013 2014 2015 2016 2017
Do
llars
Per
Gal
lon
RIN PricesMinimum Scenario – Oct/Sep Marketing Year
0.00
0.20
0.40
0.60
0.80
1.00
1.20
1.40
10/11 11/12 12/13 13/14 14/15 15/16 16/17
Do
llars
Per
Gal
lon
Biodiesel Advanced Conventional
Soybean Oil PriceMinimum Scenario – Oct/Sep Marketing Year
0.00
10.00
20.00
30.00
40.00
50.00
60.00
10/11 11/12 12/13 13/14 14/15 15/16 16/17
Ce
nts
Per
Po
un
d
Biodiesel Returns and Variable CostsMinimum Scenario – Oct/Sep Marketing Year
0.00
1.00
2.00
3.00
4.00
5.00
6.000
9/1
0
10
/11
11
/12
12
/13
13
/14
14
/15
15
/16
16
/17
Do
llars
Per
Gal
lon
Biodiesel Glycerin
Variable Costs (Soy Oil) Variable Costs (Weighted Average Feedstocks)
US Farm Program Payments(ARC & PLC)
5.15
9.879.53
3.56
5.15
9.839.48
3.27
0.0
2.0
4.0
6.0
8.0
10.0
12.0
2015 2016 2017 2018
Bill
ion
Do
llars
Baseline: EPA Proposed SC 1: Minimum D4 VO
US Farm Program Payments(ARC & PLC)
5.15
9.879.53
3.56
5.15
9.839.48
3.27
5.15
9.60 9.40
2.70
0.0
2.0
4.0
6.0
8.0
10.0
12.0
2015 2016 2017 2018
Bill
ion
Do
llars
Baseline: EPA Proposed SC 1: Minimum D4 VO SC 2: Realistic D4 VO
Thank You!
John Kruse, PhD
Principal & Director of Quantitative Analysis, WAEES
573-228-9842