Philip W. MadsonPresident

Cincinnati, Ohio U S A

THE FUTURE OFTHE FUTURE OFFUEL ETHANOLFUEL ETHANOLTHE FUTURE OFTHE FUTURE OFFUEL ETHANOLFUEL ETHANOL

Small Grains and Cattle Small Grains and Cattle Leading the Way!Leading the Way!

Small Grains and Cattle Small Grains and Cattle Leading the Way!Leading the Way!

MORE THAN 6,000MORE THAN 6,000ETHANOL PLANTSETHANOL PLANTS

WORLDWIDEWORLDWIDESOURCE: DR. JOHN MURTAGHSOURCE: DR. JOHN MURTAGH

RANGE OF RANGE OF TECHNOLOGIES TECHNOLOGIES

EMPLOYEDEMPLOYED

Bioagra

DO SMALL GRAINSDO SMALL GRAINSWORKWORK

FOR ETHANOL?FOR ETHANOL?

Abengoa BioenergyAbengoa BioenergyNetherlandsNetherlands

OsageOsage

ENSUSENSUS

ENSUSENSUS

MAX. HOURLY WIND PRESSURE

BIOETANOL GALICIABIOETANOL GALICIA

CASTILLA y LEONCASTILLA y LEONCASTILLA y LEONCASTILLA y LEON

Agrana

TARKIMTARKIM

POUNDMAKERPOUNDMAKER

NORTH WEST TERMINALNORTH WEST TERMINALUNITY, SASKATCHEWANUNITY, SASKATCHEWAN

HUSKYHUSKYENERGYENERGYHUSKYHUSKY

ENERGYENERGY

Minnedosa, ManitobaMinnedosa, ManitobaMinnedosa, ManitobaMinnedosa, Manitoba

Lloydminster, SaskatchewanLloydminster, SaskatchewanLloydminster, SaskatchewanLloydminster, Saskatchewan

PERSPECTIVEPERSPECTIVE AGRICULTURAL INTEGRATIONAGRICULTURAL INTEGRATION FUTURE FEEDSTOCKSFUTURE FEEDSTOCKS TECHNOLOGY ASSESSMENTTECHNOLOGY ASSESSMENT HOW CAN MONTANA WIN?HOW CAN MONTANA WIN?

AGENDAAGENDAAGENDAAGENDA

TODAY IN USATODAY IN USA

““SQUARE BOXSQUARE BOX IN A CORNFIELD”IN A CORNFIELD”

TODAY IN USATODAY IN USA

““SQUARE BOXSQUARE BOX IN A CORNFIELD”IN A CORNFIELD”

Natural gas

THE “SQUARE BOX” THE “SQUARE BOX” RISKRISK

THE “SQUARE BOX” THE “SQUARE BOX” RISKRISK

- COMMODITY CYCLESCOMMODITY CYCLES- COMMODITY CYCLESCOMMODITY CYCLES

WORLD COMMODITY PRICESWORLD COMMODITY PRICESWORLD COMMODITY PRICESWORLD COMMODITY PRICES

??

0

200

400

600

800

1000

1200

1400

1600

1800

2000

91 92 93 94 95 96 97 98 99

YEAR

MIL

LIO

N G

AL

LO

NS

"Square Boxes"

Wet Mills and Others

U.S. FUEL ETHANOL PRODUCTIONU.S. FUEL ETHANOL PRODUCTION- Second Cycle - 1991-1999- Second Cycle - 1991-1999

CAN THE COMMODITYCAN THE COMMODITYRISK BE MITIGATEDRISK BE MITIGATED

????

CAN THE COMMODITYCAN THE COMMODITYRISK BE MITIGATEDRISK BE MITIGATED

????

MULTIPLE FEEDSTOCKSMULTIPLE FEEDSTOCKSMULTIPLE FEEDSTOCKSMULTIPLE FEEDSTOCKS

• WHEATWHEAT• BARLEYBARLEY• CORNCORN• MILOMILO• TRITICALETRITICALE

• WHEATWHEAT• BARLEYBARLEY• CORNCORN• MILOMILO• TRITICALETRITICALE

HUSKYHUSKYENERGYENERGYHUSKYHUSKY

ENERGYENERGY

Minnedosa, ManitobaMinnedosa, ManitobaMinnedosa, ManitobaMinnedosa, Manitoba

Lloydminster, SaskatchewanLloydminster, SaskatchewanLloydminster, SaskatchewanLloydminster, Saskatchewan

TARKIMTARKIM

CASTILLA y LEONCASTILLA y LEONCASTILLA y LEONCASTILLA y LEON

WHEAT, BARLEY, AND WHEAT, BARLEY, AND OTHER GRAINS YIELD OTHER GRAINS YIELD

PROPORTIONAL TO PROPORTIONAL TO STARCH CONTENTSTARCH CONTENT

EXAMPLEEXAMPLE20 MM GPY PLANT20 MM GPY PLANT

EXAMPLEEXAMPLE20 MM GPY PLANT20 MM GPY PLANT

FEEDSTOCKTon/Yr

WHEATWHEAT

BARLEYBARLEY

210,000 (+8%)

CORN CORN (base)(base)

DDGSTon/Yr

70,000 (+26%)

234,000 (+21%) 98,000 (+77%)

194,000 55,500

EXAMPLEEXAMPLE20 MM GPY PLANT20 MM GPY PLANT

EXAMPLEEXAMPLE20 MM GPY PLANT20 MM GPY PLANT

FEEDSTOCKTon/Yr

WHEATWHEAT

BARLEYBARLEY

210,000 (+8%)

CORN CORN (base)(base)

DDGSTon/Yr

70,000 (+26%)

234,000 (+21%) 98,000 (+77%)

194,000 55,500

Know your livestock!

INTEGRATED AGRICULTUREINTEGRATED AGRICULTUREFOOD, FEED, FUELFOOD, FEED, FUEL

InternalAnimal Feeds

Electricity and boiler

Renewable "Green" Grid

Electricity

Ethanol (Fuel Grade)

W D G(Wet Distillers

Grain)Anaerobic Digester

Waste

Beef Facility

BeefMilk

NitrogenBioFertilizers

as N-P-K

DDG Export(Dried Distillers Grain)

Dairy Facility

Ethanol Plant

WaterWaste

Waste and

solubles

Steam and Electricity

EE33

REEVEREEVEAGRI-ENERGYAGRI-ENERGY

POUNDMAKERPOUNDMAKER

Animal Feed CoproductsAnimal Feed CoproductsThe Forgotten ValueThe Forgotten Value

0%

20%

40%

60%

80%

100%

120%

140%

Ideal Ration General Ration Poor Ration Current MarketPrice

Per

cen

t C

orn

Val

ue

Animal Feed Coproducts ValueAnimal Feed Coproducts Value

Value ofValue ofCornCorn

Consequences of Industry PracticeConsequences of Industry Practicere: Animal Feed Coproductsre: Animal Feed Coproducts

• If agriculture system is viewed as a whole, If agriculture system is viewed as a whole, the livestock industry captures the the livestock industry captures the differential. Therefore, the value-added differential. Therefore, the value-added money remains in the ag community.money remains in the ag community.

• If export, the differential value-added If export, the differential value-added potential is lost to USA agriculture.potential is lost to USA agriculture.

Barley

ETHANOLETHANOL

Osage Bio EnergyOsage Bio EnergyDEHULLEDDEHULLED

BARLEYBARLEY(91-93%)(91-93%)

STEAMSTEAM

BarleyDehulling

EthanolPlant

BiomassBoiler

BARLEY BARLEY PROTEIN MEALPROTEIN MEAL

RENEWABLERENEWABLEFUEL PELLETSFUEL PELLETS

HULLSHULLS(7-9%)(7-9%)

SO…SO…IS THEREIS THERE

MORE THANMORE THANJUST CORN?JUST CORN?

SO…SO…IS THEREIS THERE

MORE THANMORE THANJUST CORN?JUST CORN?

SO…SO…IS THEREIS THERE

MORE THANMORE THANJUST CORN?JUST CORN?

YES!YES!

SO…SO…IS THEREIS THERE

MORE THANMORE THANJUST CORN?JUST CORN?

YES!YES!

GENERATION 1.5GENERATION 1.5GENERATION 1.5GENERATION 1.5

LETLET““MOTHER NATURE”MOTHER NATURE”

HELPHELP

LETLET““MOTHER NATURE”MOTHER NATURE”

HELPHELP

““Wheat”Wheat”““Energy Wheat”Energy Wheat”““Wild Wheat”Wild Wheat”

““High Protein”High Protein”

““High Starch”High Starch”

ENERGY WHEATENERGY WHEATAND BARLEYAND BARLEY

Biomass Fuel

TECHNOLOGYTECHNOLOGYASSESSMENTASSESSMENTTECHNOLOGYTECHNOLOGYASSESSMENTASSESSMENT

Is Corn the Bridge toIs Corn the Bridge toCellulose Ethanol?Cellulose Ethanol?

Is Corn the Bridge toIs Corn the Bridge toCellulose Ethanol?Cellulose Ethanol?

Commodity CyclesCommodity CyclesInvestment ManiaInvestment Mania

BankruptciesBankruptciesPremature AnnouncementsPremature Announcements

Funky ScienceFunky Science

Commodity CyclesCommodity CyclesInvestment ManiaInvestment Mania

BankruptciesBankruptciesPremature AnnouncementsPremature Announcements

Funky ScienceFunky Science

Is Corn the Bridge toIs Corn the Bridge toCellulose Ethanol?Cellulose Ethanol?

Is Corn the Bridge toIs Corn the Bridge toCellulose Ethanol?Cellulose Ethanol?

Is Corn the Bridge toIs Corn the Bridge toCellulose Ethanol?Cellulose Ethanol?Or Has the BridgeOr Has the Bridge

Been Blown?Been Blown?

Is Corn the Bridge toIs Corn the Bridge toCellulose Ethanol?Cellulose Ethanol?Or Has the BridgeOr Has the Bridge

Been Blown?Been Blown?

Do we needDo we needa new paradigm?a new paradigm?

Do we needDo we needa new paradigm?a new paradigm?

•Purpose-grown small grains

•Biomass-fueled boilers

•Livestock integration

Generation 1.5Generation 1.5

Is Corn ReallyIs Corn Reallythe Bridge tothe Bridge toSmall GrainsSmall GrainsFeedstocks?Feedstocks?

Is Corn ReallyIs Corn Reallythe Bridge tothe Bridge toSmall GrainsSmall GrainsFeedstocks?Feedstocks?

We mustWe mustalways remember…always remember…

We mustWe mustalways remember…always remember…

“ “ ALCOHOLISM ”ALCOHOLISM ” IS A DISEASE IS A DISEASE

“ “ VALUE - ADDED PROCESSING ”VALUE - ADDED PROCESSING ”

IS A BUSINESS IS A BUSINESS

“ “ ALCOHOLISM ”ALCOHOLISM ” IS A DISEASE IS A DISEASE

“ “ VALUE - ADDED PROCESSING ”VALUE - ADDED PROCESSING ”

IS A BUSINESS IS A BUSINESS