impact of u.s. ethanol fuel policy on feed & food prices
TRANSCRIPT
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Impact of U.S. Ethanol Fuel Policy on Feed & Food PricesAMI Foundation 2008 Environmental Conference, June 5-6, 2008 Kansas City
Ron Plain, Ph.D.D. Howard Doane ProfessorDept of Agricultural EconomicsUniversity of Missouri-Columbiahttp://web.missouri.edu/~rplain
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Change is inevitable…..
Except from a vending machine.
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SummaryThe key economic force today is raising
energy pricesHigher energy prices make ethanol more valuableHigher ethanol prices means more corn is processed into ethanol and less is fed to livestock and peopleHigh corn prices mean more corn acres and fewer acres of other crops
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OutlineBasics of ethanol production
CellulosicGrain
Overview of U.S. policySubsidiesMandatesTariff
Economics of ethanolImpact of ethanol policy
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Basics of Ethanol ProductionEthanol is an alcohol made by fermenting grain and other carbohydratesThis is an old process which traditionally has been used to produce ethanol for use as a beverage97% of U.S. ethanol is made from cornRest: milo, wheat, brewery waste, whey, etc<0.01% made from cellulose
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Cellulosic Ethanol
Cellulose is a long chain polymeric polysaccharide of beta glucose: (C6H12O5)n
Cellulose is the chief constituent of the cell walls of all plants. Cotton in its raw state contains about 91% and is the purest form of natural cellulose. Other sources include hemp (77%), softwoods & hardwoods (57% to 65%).
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Cellulosic Ethanol
Cellulosic ethanol is ethanol made from cellulose. It is the same as grain ethanol: C2H5OH. The only difference is the source material.The interest in cellulosic ethanol comes from the huge supply of low-value source material:
Wood – trees, limbs, paper, cardboardGrass - switchgrass, corn stalks, straw, fescueDistillers Grains
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Cellulosic Ethanol
Producing ethanol from cellulose is something we’ve known how to do for over 100 years
Doing it in a cost-competitive manner is something we have yet to learn
However, there are many people seeking research grants who claim to be close to solving the cost problem
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Grain Ethanol
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A bushel of corn will produce ~2.8 gallons of ethanol, 17 lbs of CO2 and 17 lbs of DDGS
water
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Laddonia Ethanol Plant
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Ethanol Production, 1980-07
0.0
1.0
2.0
3.0
4.0
5.0
6.0
7.0
1980
1982
1984
1986
1988
1990
1992
1994
1996
1998
2000
2002
2004
2006
Bill
ion
Gal
lons
Source: Renewable Fuels Association
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U.S. Daily Ethanol Production
0
100
200
300
400
500
600Ja
n
Feb
Mar
Apr
May Jun
Jul
Aug Se
p
Oct
Nov
Dec
Thou
sand
Bar
rels
2006 2007 2008
Source: Renewable Fuels Association
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Ethanol Capacity Growth
0
2
4
6
8
10
12
14
1999 2000 2001 2002 2003 2004 2005 2006 2007 2008
billi
on g
allo
ns
Jan. 1 capacity Under construction
Source: Renewable Fuel Association website http://www.ethanolrfa.org/industry/statistics/#B
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Ethanol Plant Statistics, 5/28/08
151 existing plants in 26 states with capacity to produce 8.6919 billion gallons of ethanol per year (49 plants farmer owned)51 new plants under construction and 7 expansions with capacity to produce 4.914 billion gallons of ethanol per year>50 plants being planned
Source: Renewable Fuels Association
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OutlineBasics of ethanol production
CellulosicGrain
Overview of U.S. policySubsidiesMandatesTariff
Economics of ethanolImpact of ethanol policy
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Subsidies for Ethanol Production
51 cent per gallon federal excise tax credit45 cent per gallon under new Farm BillMissouri has producer tax credits
20 cents on first 12.5 million gallonsIowa and Illinois state excise tax exemptions
1 to 1.5 cents per gallon with income tax credits for Iowa retailers selling more than 60 percent ethanol-blended fuel
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Ethanol Production & Renewable Fuels Mandate
02468
1012141618
1998
2000
2002
2004
2006
2008
2010
2012
2014
2016
Bill
ion
Gal
lons
Ethanol Production 05 Mandate07 Mandate
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2007 Renewable Fuels Mandate
05
10152025303540
20
08
20
09
20
10
20
11
20
12
20
13
20
14
20
15
20
16
20
17
20
18
20
19
20
20
20
21
20
22
Bill
ion
Gal
lons
Corn ethanol Cellulosic Bio-diesel More non-grain
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Ethanol Production, 1990-2016
02468
101214161820
1990
1992
1994
1996
1998
2000
2002
2004
2006
2008
2010
2012
2014
2016
Bill
ion
Gal
lons
mandated use
actual production
Beginning in 2015, the U.S. will annually use more corn to make ethanol than the U.S. produced in any year before 1971
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U.S. Ethanol Imports, 2002-07
0
100
200
300
400
500
600
70020
02
2003
2004
2005
2006
2007
Mill
ion
Gal
lons
Source: Renewable Fuels Association
There is a 54¢ per gallon tariff on imported ethanol
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U.S. Ethanol Imports
0
20
40
60
80
100
120
140Ja
n
Feb
Mar
Apr
May Jun
Jul
Aug Se
p
Oct
Nov
Dec
Mill
ion
Gal
lons
2006 2007 2008
Source: Renewable Fuels Association
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World Ethanol Production, 2007
4%4%
38%
49%
5%
U.S.A.
Brazil
E.U.
China
others
Source: Renewable Fuels Association
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U.S. Ethanol Imports, 2007
18%
17%
9%
10%2%
44%BrazilJamaicaEl SalvadorCosta RicaTrinadadOthers
Source: Renewable Fuels Association
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OutlineBasics of ethanol production
CellulosicGrain
Overview of U.S. policySubsidiesMandatesTariff
Economics of ethanolImpact of ethanol policy
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Economics of BioFuelsThe economics of biofuels is confusing, in part, because we measure gasoline and diesel in gallons and corn and soybeans in bushelsMeasuring everything in pounds makes the economics easier to understand
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Economics of EthanolCorn is worth 10¢ per poundGasoline is worth 45¢ per poundDDGS is worth 9.5¢ cents per poundThe cost of conversion is 4¢ per poundThere is a federal government subsidy of 2.5¢for each pound of corn converted to ethanol and DGS
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Ethanol Plants Have Been Very Profitable
In 2006, U.S. plants produced ethanol for about $1.34 per gallon. The average price of ethanol was about $2.58 per gallon.
Profit=$1.24/gal or $3.42/bu
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Value of ethanol
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Formulation of Alcohols
H
O
H-C-H
H
Methanol
CH3OH
62,800 BTU
H
O
H-C-H
H-C-H
H
Ethanol
C2H5OH
84,400 BTU
H
O
H-C-H
H-C-H
H-C-H
H
Propanol
C3H7OH
100,000 BTU
H
O
H-C-H
H-C-H
H-C-H
H-C-H
H
Butanol
C4H9OH
110,000 BTUGasoline is mostly C8H18
Gasoline has 125,000 BTU/gallon
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Ethanol as FuelOver 90% of U.S. ethanol is used as fuel Although ethanol and gasoline can be blended in any proportion, in the U.S. it is largely:
10% ethanol & 90% gasoline85% ethanol & 15% gasoline (E85)
Blends with high ethanol content require modifications in the automobile (flexible fuel vehicle)
Sensor to detect ethanol/gasoline ratioCorrosion resistant fuel tank & lines
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Ethanol Price with $2 Gasoline Rack Price ~ $2.70 Retail Gasoline
0.000.501.001.502.002.503.003.504.004.50
1 3 5 7 9 11 13 15 17 19
Billion Gallons/Year
$/ga
llon
Mandated use
E10 octane enhancerE85 fuel
Assuming no bottlenecks
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Ethanol & Unleaded Gasoline Average Rack Price – FOB Omaha
0.50
1.00
1.50
2.00
2.50
3.00
3.50
4.00 J
an 0
5
Apr Ju
l
Oct
Jan
06
Apr Ju
l
Oct
Jan
07
Apr Ju
l
Oct
Jan
08
Apr
$/ga
llon
ethanol gasoline
Source: http://www.neo.ne.gov/statshtml/66.html
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Iowa Ethanol & Midwest Retail Gasoline Prices
1.30
1.80
2.30
2.80
3.30
3.80
4.3010
/27/
2006
12/2
7/20
06
2/27
/200
7
4/27
/200
7
6/27
/200
7
8/27
/200
7
10/2
7/20
07
12/2
7/20
07
2/27
/200
8
4/27
/200
8
$/ga
llon
ethanol gasoline
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OutlineBasics of ethanol production
CellulosicGrain
Overview of U.S. policySubsidiesMandatesTariff
Economics of ethanolImpact of ethanol policy
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Impact on corn prices
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Corn Milled for Ethanol
0.00.51.01.52.02.53.03.54.04.5
90-9
1
92-9
3
94-9
5
96-9
7
98-9
9
00-0
1
02-0
3
04-0
5
06-0
7
08-0
9
Bill
ion
Bus
hels
Forecast% corn for ethanol:
2000-01: 6%
2005-06: 14%
2006-07: 20%
2007-08: 23%
2008-09: 33%
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1.251.501.752.002.252.502.753.003.253.503.754.004.254.504.755.005.255.505.756.006.25
JAN
APR JUL
OCT
$ Per Bu.
Avg. 1999-03200620072008
Omaha Corn Prices, weekly
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U.S. Corn Price, 1970-09
0.0
1.0
2.0
3.0
4.0
5.0
6.070
-71
72-7
3
74-7
5
76-7
7
78-7
9
80-8
1
82-8
3
84-8
5
86-8
7
88-8
9
90-9
1
92-9
3
94-9
5
96-9
7
98-9
9
00-0
1
02-0
3
04-0
5
06-0
7
08-0
9
Dol
lars
Per
Bus
hel
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U.S. Retail Gasoline Prices,All Grades, All Formulations, 1996-2008
50
100
150
200
250
300
350
400
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
cent
s/ga
llon
Source: U.S. Energy Information Administration
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Spot Crude Oil Prices 1995-2008WTI, Monthly Average Price, Cushing, Oklahoma
0
20
40
60
80
100
120
1401
99
5
19
96
19
97
19
98
19
99
20
00
20
01
20
02
20
03
20
04
20
05
20
06
20
07
20
08
$/b
arre
l
Source: U.S. Energy Information Administration
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Crude Oil Futures Prices
120
121
121
122
122
123
123
124 J
ul 0
8 S
ep 0
8 N
ov
08
Jan
09
Mar
09
May
Jul
09
Sep
09
No
v 0
9 J
an 1
0 M
ar 1
0 M
ay J
ul 1
0 S
ep 1
0 N
ov
10
Jan
11
Mar
11
May
Jul
11
Sep
11
No
v 1
1 J
an 1
2 M
ar 1
2 M
ay J
ul 1
2 S
ep 1
2 N
ov
12
Jan
13
Mar
13
May
Jul
13
Sep
13
No
v 1
3
$/b
arre
l
Source: New York Mercantile Exchange close on 6/04/08
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Crude Oil Futures Prices
120
121
122
123
124
125
126 J
ul 0
8 S
ep 0
8 N
ov
08
Jan
09
Mar
09
May
Jul
09
Sep
09
No
v 0
9 J
an 1
0 M
ar 1
0 M
ay J
ul 1
0 S
ep 1
0 N
ov
10
Jan
11
Mar
11
May
Jul
11
Sep
11
No
v 1
1 J
an 1
2 M
ar 1
2 M
ay J
ul 1
2 S
ep 1
2 N
ov
12
Jan
13
Mar
13
May
Jul
13
Sep
13
No
v 1
3
$/b
arre
l
Source: New York Mercantile Exchange close on 6/04/08
$122/barrel = $2.90/gal
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Ethanol-Gasoline Price Relationship
0.0
1.0
2.0
3.0
4.0
5.0
0.5 1.0 1.5 2.0 2.5 3.0 3.5 4.0 4.5 5.0 5.5 6.0
Retail Gasoline $/gal
Eth
anol
$/g
al
Source: Ron Plain
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2007 Ethanol-Corn Price Relationship
0.00.51.01.52.02.53.03.5
1 2 3 4 5 6 7 8 9Corn $/bu
Etha
nol $
/gal breakeven shutdown
Source: Ron Plain
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U.S. Average Corn Price, 1908-2006
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
Source: USDA/NASS
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U.S. Average Corn Price, 1908-2006
0.000.501.001.502.002.503.003.504.00
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
Source: USDA/NASS
1908-194235 years Avg $0.78
1942-197230 years
Avg $1.26
1973-200634 years Avg $2.37
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U.S. Average Corn Price, 1908-2006
0.000.501.001.502.002.503.003.504.00
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
1908-194235 years Avg $0.78
1942-197230 years Avg $1.26
1973-200634 years Avg $2.37
The 1940s step raised corn price 62%; the 70s step 88%. A 75% step will take corn to $4.15/bu
What’s the next level?
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Impact on DDGS Prices
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Northwest Iowa Prices, 2006-08
0
50
100
150
200
25010
/6/2
006
10/2
0/20
0611
/3/2
006
11/1
7/20
0612
/1/2
006
12/1
5/20
0612
/29/
2006
1/12
/200
71/
26/2
007
2/9/
2007
2/23
/200
73/
9/20
073/
23/2
007
4/6/
2007
4/20
/200
75/
4/20
075/
18/2
007
6/1/
2007
6/15
/200
76/
29/2
007
7/13
/200
77/
27/2
007
8/10
/200
78/
24/2
007
9/7/
2007
9/21
/200
710
/5/2
007
10/1
9/20
0711
/2/2
007
11/1
6/20
0711
/30/
2007
12/1
4/20
0712
/28/
2007
1/11
/200
81/
25/2
008
2/8/
2008
2/22
/200
83/
7/20
083/
21/2
008
4/4/
2008
4/18
/200
85/
2/20
085/
16/2
008
5/30
/200
8
$ Per Ton
Corn DDGS WDGS
Source: LMIC
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WDGS Price as % of DDGS Price, Northwest Iowa, 2006-08
20
25
30
35
40
45
10/6
/200
610
/20/
2006
11/3
/200
611
/17/
2006
12/1
/200
612
/15/
2006
12/2
9/20
061/
12/2
007
1/26
/200
72/
9/20
072/
23/2
007
3/9/
2007
3/23
/200
74/
6/20
074/
20/2
007
5/4/
2007
5/18
/200
76/
1/20
076/
15/2
007
6/29
/200
77/
13/2
007
7/27
/200
78/
10/2
007
8/24
/200
79/
7/20
079/
21/2
007
10/5
/200
710
/19/
2007
11/2
/200
711
/16/
2007
11/3
0/20
0712
/14/
2007
12/2
8/20
071/
11/2
008
1/25
/200
82/
8/20
082/
22/2
008
3/7/
2008
3/21
/200
84/
4/20
084/
18/2
008
5/2/
2008
5/16
/200
85/
30/2
008
Percent
Source: LMIC
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DDGS Price as % of Corn Price, Northwest Iowa, 2006-08
65707580859095
100105110115
10/6
/200
610
/20/
2006
11/3
/200
611
/17/
2006
12/1
/200
612
/15/
2006
12/2
9/20
061/
12/2
007
1/26
/200
72/
9/20
072/
23/2
007
3/9/
2007
3/23
/200
74/
6/20
074/
20/2
007
5/4/
2007
5/18
/200
76/
1/20
076/
15/2
007
6/29
/200
77/
13/2
007
7/27
/200
78/
10/2
007
8/24
/200
79/
7/20
079/
21/2
007
10/5
/200
710
/19/
2007
11/2
/200
711
/16/
2007
11/3
0/20
0712
/14/
2007
12/2
8/20
071/
11/2
008
1/25
/200
82/
8/20
082/
22/2
008
3/7/
2008
3/21
/200
84/
4/20
084/
18/2
008
5/2/
2008
5/16
/200
85/
30/2
008
Percent
Source: LMIC
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Ethanol’s Impact on Food Prices
PrimaryThrough corn products
SecondaryThrough animal products
TertiaryThrough competitive crops
More corn acres = fewer acres for other crops
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Food Marketing Bill
18.7
8
4
3.5
4.7
43.62.74.31.53.5
3.1
38.5
Farm ValuePackagingTransportationFuel & ElecPretax ProfitsAdvertisingDepreciationInterestRentRepairsBusiness TaxesOtherLabor
Source: USDA/ERS data for 2002
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Impact on Food Prices
In 2002, the farm value of U.S. consumer food expenditures was 18.7%. Corn made up 11.3% of that farm value. Thus, corn, directly and mostly indirectly, accounted for 2.1% of consumer food expenditures.
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Food Marketing Bill
16.6
8
4
3.5
4.7
43.6
2.74.31.53.53.1
38.5
2.1Farm Value-otherPackagingTransportationFuel & ElecPretax ProfitsAdvertisingDepreciationInterestRentRepairsBusiness TaxesOtherLaborFarm Value-corn
Source: USDA/ERS data for 2002
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Impact on Food Prices
Since corn only accounted for 2.1% of consumer food expenditures, doubling corn prices should raise the cost of food by 2.1%; tripling the price of corn should raise the cost of food by 4.2%.
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Impact on Food Prices
American spend 10% of their disposable personal income on food. A 4.2% increase in food costs due to a tripling in corn prices should increase the cost of living by 0.42%.
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Food Prices, April 08 vs April 07Food + 5.1%
At home +5.9%Away from home +4.1%
Cereals & bakery + 8.9%Meat, poultry, fish & eggs + 3.7%Dairy +11.8%Fats & oils +12.3%Sugar & sweets + 5.1%Fruits & vegetables + 4.1%
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Impact on crop acres
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Million Acres Planted by Crop2006 2007 Change
Corn 78.327 93.600 + 15.273Soybeans 75.522 63.631 - 11.891Wheat 57.344 60.433 + 3.089Cotton 15.274 10.830 - 4.444Sorghum 6.522 7.718 + 1.196Oats 4.168 3.760 - 0.408 Barley 3.452 4.020 + 0.568 18 crops 315.835 319.990 + 4.030
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July 08 Corn Futures
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July 08 Soybean Futures
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U.S. Soybean/Corn Price Ratio, 1975-08
0.00.51.01.52.02.53.03.54.0
75-7
6
77-
78
79-
80
81-
82
83-
84
85-8
6
87-
88
89-
90
91-
92
93-
94
95-
96
97-
98
99-
00
01-
02
03-
04
05-
06
07-
08
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65
75
85
95
105
115
125
135
145
MAY JUL SEP NOV JAN MAR
$ Per Ton
Avg.2001-06
2006/07
2007/08
Average Price Non-Alfalfa Hay
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Impact on livestock
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U.S. Corn Usage
Feed
Exports
Ethanol
Other
Feed
Exports
Ethanol
Other
2000 crop 2007 crop
Corn usage is up 30% since 2000
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FORECAST CHANGE IN CORN USAGE 2007-17 (million bushels)
1700
125
110175
Ethanol
Exports
Other
Feed
Source: February 2008 USDA Agricultural Baseline Projections
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U.S. Feeding of Corn, 2005-06
Beef
Poultry
Hogs
Dairy
Other
Source: PRX ProExporter Network
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March 2008 Corn Futures
January 2008 Feeder Cattle Futures
A dime increase in the price of corn reduces the value of feeder cattle by $6-9 per head
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Federally Inspected, Weekly
35
40
45
50
55
60
65
70
75
80
Jan
Apr Ju
l
Oct
Thou. Head
2005 2006 2007 2008
2008 cow slaughter is up 4.2%
Beef Cow Slaughter
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Cost of Slaughter Hog ProductionIowa State University Calculations, 1987-2008
37
42
47
52
57
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
Marketing Month
$ Per Live Cwt
Source: John Lawrence, Iowa State University
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Over time, the price of a commodity will equal the cost of production
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U.S. Average Corn & Broiler Price, 1960-1985
0.00
0.50
1.00
1.50
2.00
2.50
3.00
3.50
1960
1961
1962
1963
1964
1965
1966
1967
1968
1969
1970
1971
1972
1973
1974
1975
1976
1977
1978
1979
1980
1981
1982
1983
1984
1985
Cor
n $
20
30
40
50
60
70
80
90
Bro
iler $
Corn Broilers
Source: USDA/NASS
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U.S. Average Corn & Pork Price, 1960-1985
0.00
0.50
1.00
1.50
2.00
2.50
3.00
3.50
1960
1961
1962
1963
1964
1965
1966
1967
1968
1969
1970
1971
1972
1973
1974
1975
1976
1977
1978
1979
1980
1981
1982
1983
1984
1985
Cor
n $
0
20
40
60
80
100
120
140
160
180
200
Pork
$
Corn Pork
Source: USDA/NASS
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U.S. Average Corn & Beef Price, 1960-1985
0.00
0.50
1.00
1.50
2.00
2.50
3.00
3.50
1960
1961
1962
1963
1964
1965
1966
1967
1968
1969
1970
1971
1972
1973
1974
1975
1976
1977
1978
1979
1980
1981
1982
1983
1984
1985
Cor
n $
0
0.5
1
1.5
2
2.5
3
Bee
f $
Corn Beef
Source: USDA/NASS
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U.S. Average Corn & Milk Price, 1960-1985
0.00
0.50
1.00
1.50
2.00
2.50
3.00
3.50
1960
1961
1962
1963
1964
1965
1966
1967
1968
1969
1970
1971
1972
1973
1974
1975
1976
1977
1978
1979
1980
1981
1982
1983
1984
1985
Cor
n $
0
2
4
6
8
10
12
14
16
Milk
$
Corn Milk
Source: USDA/NASS
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U.S. Average Corn & Hog Price, 1960-2007
0.00
1.00
2.00
3.00
4.00
5.00
6.00
7.00
1960
1962
1964
1966
1968
1970
1972
1974
1976
1978
1980
1982
1984
1986
1988
1990
1992
1994
1996
1998
2000
2002
2004
2006
2008
2010
Cor
n $
0
20
40
60
80
100
120
Hog
$
Corn Hogs
Source: USDA/NASS
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U.S. Average Corn & Cattle Price, 1960-2007
0.00
1.00
2.00
3.00
4.00
5.00
6.00
7.00
1960
1962
1964
1966
1968
1970
1972
1974
1976
1978
1980
1982
1984
1986
1988
1990
1992
1994
1996
1998
2000
2002
2004
2006
2008
2010
Cor
n $
0
20
40
60
80
100
120
140
160
180
200
Cat
tle $
Corn Cattle
Source: USDA/NASS
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Meat Consumption
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U.S. Per Capita Meat ConsumptionRetail Weight, 1955-2007
160170180190200210220230240250
55 60 65 70 75 80 85 90 95 00 05
Poun
ds
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Impact of EthanolBuilding lots of ethanol plantsDriving up corn prices
More corn acresFewer acres of other crops
Higher prices for other cropsRecord net farm income
Driving up cash rents and land pricesDriving up livestock production costs
Less meat, milk and eggs being producedLots of DDGS will benefit cattleNew grain storage/shipping patterns
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The New Ag Market?
Crude oil drives ethanol pricesEthanol drives corn pricesCorn drives livestock productionLivestock production drives meat prices
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Impact on Oil Prices
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Spot Crude Oil Prices 1996-2008WTI, Cushing, Oklahoma
0
20
40
60
80
100
120
140
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
$/ba
rrel
Source: U.S. Energy Information Administration
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U.S. Gasoline Usage, 1986-07
0
20
40
60
80
100
120
140
16019
86
1988
1990
1992
1994
1996
1998
2000
2002
2004
2006
Bill
ion
Gal
lons
Source: U.S. Energy Information Administration
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Ethanol Production, 1980-07
0.0
1.0
2.0
3.0
4.0
5.0
6.0
7.019
80
1982
1984
1986
1988
1990
1992
1994
1996
1998
2000
2002
2004
2006
Bill
ion
Gal
lons
Source: Renewable Fuels Association
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Gasoline & Ethanol Production, 1986-07
0
20
40
60
80
100
120
140
16019
86
1988
1990
1992
1994
1996
1998
2000
2002
2004
2006
Bill
ion
Gal
lons
ethanol gasoline
Source: U.S. Energy Information Administration
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U.S. Gasoline Usage
142 billion gallons gasoline used per yearMandating 10% ethanol in all gasoline would require that nearly half of the U.S. corn crop be processed into ethanolIf all U.S. corn were made into ethanol, it would produce 33 billion gallons per yearTo replace all U.S. gasoline would require 78 billion bushels of corn annually
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78 Billion Bushels of Corn
Record U.S. corn yield is 160 bu/acre78 billion bushels at 160 bu/acre would require 488 million harvested acres of cornEquals 164% of 2007 U.S. harvested acreage of corn, soybeans, wheat, sorghum, cotton, rice, sunflowers, barley, oats, rye, peanuts, tobacco, canola, sugar beets, sugarcane, potatoes, dry edible beans, proso millet and hay combined.
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Diesel-Gasoline Price Spread
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U.S. Retail Fuel Prices, 2000-2008
50
150
250
350
450
55020
00
2001
2002
2003
2004
2005
2006
2007
2008
cent
s/ga
llon
retail gas $ retail diesel $
Source: U.S. Energy Information Administration
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U.S. Retail Diesel-Gasoline Price Spread, 2000-2008
-60
-40
-20
0
20
40
60
80
2000
2001
2002
2003
2004
2005
2006
2007
2008ce
nts/
gallo
n
Source: U.S. Energy Information Administration
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Gas-Diesel Price SpreadCrude oil yields roughly 58% gasoline and 30%
diesel fuel.When gasoline demand is greater than 193% of diesel demand, gasoline prices are high relative to dieselWhen gasoline demand is less than 193% of diesel, gasoline prices are low relative to diesel
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Impact on Environment
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Ethanol: energy gain or loss?The fossil fuel energy gain from ethanol in new
dry milled plants is above 30%. This is higher than in the past because of efficiency gainsOn the farm
Reduced tillageIn ethanol plants
Faster, higher yielding conversion
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Greenhouse Gas EmissionsCorn Biomass
Gasoline Ethanol Ethanol--grams of GHG/MJ of energy--
Feedstock + 4 + 24 + 10Refining fuel +15 + 40 + 9Vehicle +72 + 71 + 71Feedstock Uptake 0 - 62 - 62Land use change 0 +104 +111Total +92 +177 +138
Source: Searchinger, et al, Science, February 29, 2008
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Source: Takle & Hofstrand, Iowa State University
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Questions?
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U.S. Meat Expenditures, 1970-07
0.00.51.01.52.02.53.03.54.04.55.0
1970
1980
1990
2000
% DPI
Source: Livestock Marketing Information CenterSource: Livestock Marketing Information Center
In 2007, the average American spent 1.71% of their income to buy 222 lbs of red meat and poultry
In 1970, the average American spent 4.2% of their income to buy 194 lbs of red meat and poultry
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U.S. Food Expenditures, 1929-07
0
5
10
15
20
25
3019
29
1939
1949
1959
1969
1979
1989
1999
% DPI
Source: USDA/ERSSource: USDA/ERS
In 2007 Americans spent only 9.9% of
DPI on food
In 2007 Americans spent only 9.9% of
DPI on food