Bio Energy

What is going on out there with renewables ?

Bill Beukema General Manager of SoyMor is a 30 million Gallon per year Bio

Diesel Plant in Albert Lea MN SoyMor has been in operation since August

2005 SoyMor currently uses Soybean oil as its

feed stock SoyMor was built and is currently managed

by REG

Outline of Presentation What is Ethanol and Biodiesel Overview of current Renewables

market Investment opportunities for rural

America Current impact on production

agriculture Future of renewables

What is Ethanol Ethanol is a molecule Ethanol base raw material is

– Shelled corn– Sugarcane– Cellulose

Ethanol by-products include– DDG– Co2

Ethanols conversion is– 1 bushel of corn = 2.8 gallons of ethanol– 1 bushel of corn = 18 lbs of DDG– 1 bushel of corn = 18 lbs of Co2

Ethanol energy conversion is +1.35 Petroluem energy conversion is + .88

                  

What is Biodiesel Biodiesel is a compound Biodiesel base raw material is

– Oil seed ( SBO )– Animal Fat– Waste Grease

Biodiesel by-products include– Glycerin– FFA

Biodiesel conversion is– 1 bushel of SB = 1.5 gallons of Biodiesel– 1 bushel of SB = 1.1 lbs of Glycerin

Biodiesel energy conversion is + 3.24 Petroluem energy conversion is + .88

Overview of current Renewable Market

ETHANOL– 2005 DATA

OVER 105 PLANTS

TOTAL PRODUCTION OF 4.3 BILLION GALLONS

153,725 JOBS CREATED FROM DIRECT ETHANOL PRODUCTION

? PLANTS CURRENTLY UNDER CONSTRUCTION

OVER 1.1 BILLION GALLONS TO BE ADDED

1.5 BILLION BUSHELS USED FOR ETHANOL 2005

Overview of current Renewable Market

ETHANOL– 2006-2007 Estimates

3.5 BILLION BUSHELS PROJECTED FOR FOOD AND IND USE 06-07

6.1 BILLION FOR FEED USAGE FOR 06-07

2.1 BILLION FOR EXPORT USAGE FOR 06-07

OVER ? BILLION GALLONS AT THE END OF 2007

Overview of current Renewable Market

Biodiesel– 2005 Data

75 million gallons sold 1 company marketed over half of all the

product sold ( REG) For all practical purposes biodiesel acted like

a niche product

Overview of current Renewable Market

Biodiesel– 2006 Data

Over 120 million gallons of capacity added to the market place.

Biodiesel became widely accepted– Terminal storage– Pipeline movement (Grow Mark)

Investment Opportunities for rural America

Both Ethanol and Biodiesel are experiencing tremendous Return on Equity

To a producer Ethanol and Biodiesel are Hedge type investments

Factors driving ROE– U.S. interests in becoming GREEN– Favorable tax treatment – $78 dollar crude oil– $ 3.00 gasoline and diesel pricing– $2.00 corn $.255 sbo

Current Impact on Production Agriculture

Hedge fund activity Supply and Demand Basis Supply agreements Acreage Shifts Increased sensitivity of the commodity value Shift from fair market value to margin

management To date all of these have been Positive results (

past success does not guarantee future results )

The Future of Renewables

Long term 4 to 7 years – New technology will decrease the cost of

production– Corn and Soybean acres will find a balance

based on demand– Pricing points for retail will trade a at premium

higher than the base commodity, but lower than the today's margin premium

– Entities that respect Quality, understand commodity trading and invest appropriate amounts in R & D will own those who do not

The Future of Renewables

Short term 1 to 3 years– Commodity volitity will increase– Acre shifts will be more frequent– Global energy equation will continue to be

difficult to manage– Industry will struggle the speed of

maturity