Bioenergy: Opportunities for Cooperatives in Marketing

Ethanol, Biodiesel and Byproducts

“The Role of Regional Cooperatives”

CHS Inc.

M em be r S erv ices

M k tg C o m m u n ica tio ns

P u b lic & G o v 't A ffa irs

A g S ta te s A g en cy

C o un try H e dg ing

C o fin a F ina n cia l L LC

B u sin ess S o lu tio ns

O ilse ed P ro ce ss ing

H or izo n M illing

V e ntu ra F oo ds

R e ne w a b le Fu e ls

P roce ss ing

G ra in M arke ting

C o un try O p era tio ns

A gr i lia nce

A g B u s in e ss

R e fin ed Fu e ls

S a les

P rop ane

L u br ican ts

C on tro lle r

L au re l R e fine ry

R aw M a te r ia l S u pp ly

E ne rgy

Cenex Retail Brand

CHS Energy

Gallons sold in

FY2006

• Refined Fuels 2,714,722,993• Propane 716,233,756• Lube Oil 20,199,317

Ethanol Production• A bushel of corn yields

– 17 pounds (2.8 gal) of ethanol– Dried Distillers Grain– CO2

Biodiesel Production• A bushel of soybeans yields

– 7.35 pounds (1.5 Gal) of soy methyl ester– Soy Meal– Glycerin

CHS’s Role

LogisticsLogistics

AndAnd

MarketingMarketing

Existing Ethanol Production Capacity By State

Billion Gallons per yearBillion Gallons per year

2> >1 1> >0.8

0.8> >0.5 0.5> >0.2

0.2> >0.1 0.1> >0

0

Total Capacity = 5.1 BG/yr

Existing Ethanol Production Capacity by State

Capacity per PADD

1 2 3 4 5

PADD 2

Ethanol Pricing Mechanisms

Midwest

Gulf Coast

Southern California

Northeast

China

Caribbean

Brazil

Ethanol Logistics

Refined Product Pipeline Map

MI

IA

MN

WI

IN OH

IL

MO

OK

KS

SD

NE

AR

MS AL

LA

TX

CO

WYOR

Chippewa Falls

LemontRockford

Milwaukee

Junction City

McFarland

NilesRomulus

FerrysburgMuskegon

Cedar RapidsPleasant Hill

Sioux City

Sioux Falls

Iowa City

WaterlooFt. Dodge

Rock Rapids

Kansas City

Carrollton

ColumbiaRiverside

Palmyra

Des Moines

Ft. MadisonCouncil Bluffs

Wathena

Topeka

Lincoln

Yankton

Columbus

Olathe

LeMars

Milford

Omaha

Alexandria

Pine Bend

St. Paul Park

Minneapolis

WrenshallSuperior

Watertown

Fargo

Moorhead

Madison

Waupun

Effingham

Willow Springs

Champaign

Robinson

Bryan

Clermont

IndianapolisSpeedway

Petersburg

Wood River

East St. Louis

Bettendorf

Heyworth

Forsyth

Princeton

Del City

Ponca CityTurpin Coffeyville

EnidLaverne

Sherrin

Wichita Falls

Great Bend

Hutchinson

Phillipsburg

Doniphan

El Dorado

Scott City

Wichita

Wolsey

MitchellNewcastle

Aberdeen

MandanJamestown

Rapid City

DenverCommerce City

CheyenneOsceolaSidney

Norfolk

N. Platte

CarthageSpringfield

Little Rock

Stephens

West MemphisFort Smith

Collins

Meridian

Lake Charles

Krotz Springs

Big Springs

DupontAurora

Bloomfield

Sinclair

Casper

Sheridan

Bozeman

Pocatello

UmatillaPortland

Vancouver

Glendive

Laurel

Burley

Boise

Moses Lake

Scott City

Cape Girardeau

SeattleSpokane

Hillyard

Victoria

MinotFerndaleCherry Point

PembinaAnacortes

ID

KY

MT

NM

ND

TN

WA

South Bend

AlmaBay City

Traverse City

Greenville

Ciniza

Austin

Euless

Harlingen

Placedo

Waco

HelenaNorth Little Rock

Clear Lake

Dubuque

Amboy

Concordia

McPherson

Salina

Jackson

Lansing

MankatoMarshall

Rochester

Roseau

Sauk Centre

Vicksburg

Great Falls

Missoula

Grand Forks

Geneva

Ardmore

Oklahoma City

Tulsa

Wynnewood

Eugene

Amarillo

Brownsville

Corpus Christi

Lubbock

San Antonio

Tye

Pasco

RentonTacoma

Wilma

Green BayWausau

Ethanol Logistics

• Trucking• Rail

• Storage• Terminal Blending

• Barge

• Future Pipeline?

Biodiesel Logistics

• Heated Trucks• Heated Rail• Heated Storage• Terminal Injection

Cenex Biodiesel Involvement• 1997 Tested low blends of biodiesel at 9 cooperative distributors, all of which

offered blends of .25%.• 1999 Introduction of Soymaster Premium Diesel, containing .25% soy biodiesel,

terminally injected at 9 Midwest terminals.• 2000 Began offering packaged soy methyl ester in 55 gallon drums and 5

gallon buckets through our lubricants division.• 2001 Enhancement of Premium Diesel package to be “soy enhanced” (inclusion

of soy methyl ester in the additive packages used in all Cenex premium diesels including Ruby Fieldmaster)

• 2002 Facilitated the opening of 11 “off site” loading terminals for B100 to increase economical distribution of biodiesel blends. Sales of B100 as well as estimates of 2% or higher blends increase dramatically from previous year.

• 2003 Introduced the Ruby Fieldmaster B2 Brand (Ruby Fieldmaster splash blended with 2% soy biodiesel). Sales explode to nearly 4 times previous year to date.

• 2004 Installation of 2% and 5% biodiesel injection systems in McPherson KS, McFarland WI, and Council Bluffs IA. First in the nation to offer finished, terminally injected biodiesel products at a petroleum terminal

• 2006 Installation of Biodiesel terminal in Denver, Colorado

Ethanol Marketing

•Began in late 1970’s

•Clean Air Act 1990

• Marketed ethanol blended gas through Cenex branded sites since 1978

• Supply over 500 million gallons of ethanol blended gasoline to marketplace.

Marketing Materials

Ethanol Industry Today

• Production Boom driven by Renewable Fuels Standard Mandate

• MTBE Phase Out

• E85 Market Development

Ethanol Production Growth

Total Plants (US)

– Jan 2002 61 (2.1 bgy)– Jan 2003 68 (2.7)– Jan 2004 72 (3.1)– Jan 2005 81 (3.6)– Jan 2006 96 (4.3)– Current Estimate:

• 103 (4.8)• 46 U.C. (approx 3.5)

Current Construction Capacity = 2 bgy!

RFS vs. Ethanol Production

0

1000

2000

3000

4000

5000

6000

7000

8000

2006 2008 2010 2012

RFS

EthanolProduction

• E-85 Growing in Popularity/Demand• GM and Ford marketing efforts have

created increased awareness• E-85 supply is dependent on available

ethanol and will be affected by strong demand on the coasts/MTBE phase out

FLEX FUEL (E85) VEHICLES FLEX FUEL (E85) VEHICLES

0

1,000,000

2,000,000

3,000,000

4,000,000

5,000,000

6,000,000

7,000,000

8,000,000

9,000,000

2000 2002 2004 2006 Proj 2008 Proj

and E-85

• 1000 retail outlets offer E85 nationwide• 500 of these are within CHS’ core trade

area• Over 200, or 40%, are affiliated with CHS• CHS currently offers blended E85 at 29

terminals across the midwest • CHS and GM promotion ($1000 fuel card

offer in MN)• Complete marketing kit available

U.S. Absorption of Ethanol Supply

Gasoline

E85

0

200

400

600

800

1000

1200

1400

MB

/D

E-85 – Future Brand Position

• Position E-85 within the Cenex Branded Motor Fuel Umbrella of Products

US BioEnergy

• CHS owns 25.6 percent of U.S. BioEnergy of Brookings, S.D.

• Acquisition based on:– Size and scale– Marketing ability– Risk Management

tools– Plant Management

Geographic DiversificationUS BioEnergy CorporateBrookings, SD

US Bio Woodbury

(45 MGY Plant) Lake Odessa, MI

US Bio Janesville (100 MGY Plant) Janesville, MN

Val-E Fuel Ethanol (45 MGY Plant) Ord, NE

US Bio Hankinson

(100 MGY Plant) Hankinson, ND

Construction has mobilized

Under Development

In Production

Entered into a letter of intent, there are no assurances that these acquisitions or projects will be successfully completed.

US BioEnergy OperationsSt. Paul, MN

UBE Services Wichita, KS

US Bio Albert City (100 MGY Plant) Albert City, IA

Platte Valley Fuel Ethanol

(48 MGY Plant) Central City, NE

US Bio Springfield (100 MGY Plant) Springfield, MN

US Bio / Big River Resources Joint Venture

(100 MGY Plant) Grinnell, IA

50/50 Joint Venture between

US BioEnergy and CHS

Our Growth and Vision…

0500

10001500

'05 '06 '07 '08

Ethanol Sales Volume (mmgallons)

• One billion gallons of ethanol under contract by 2009

• Maintain a balanced portfolio of US Bio Energy and non-US Bio Energy plants

• Grow into Biodiesel marketing

CHS Renewable Fuels Participation

• Ethanol Production via US BioEnergy, with 700 million gallons of production by 2008

• Wholesale marketing of ethanol and biodiesel through Provista Renewable Fuels Marketing 50/50 joint venture

• Retail marketing and distribution of ethanol and biodiesel blended products under the strength of the Cenex brand!

Thank You!