Is the Biofuels Tank Half-Full or Half-Empty?

National Farm Business Management ConferenceJune 15, 2009 St Louis, MO

Ron Plain, Ph.D.D. Howard Doane ProfessorDept of Agricultural EconomicsUniversity of Missouri-Columbiahttp://web.missouri.edu/~rplain

Basics of Ethanol Production Ethanol is an alcohol made by fermenting

grain and other carbohydrates This is an old process which traditionally has

been used to produce ethanol for use as a beverage

97% of U.S. ethanol is made from corn Rest: milo, wheat, brewery waste, whey, etc

A bushel of corn will produce ~2.8 gallons of ethanol, 17 lbs of CO2 and 17 lbs of DDGS

water

http://www.dtnethanolcenter.com/images/e0010039/ethanol_plants.html

Laddonia Ethanol Plant

Ethanol Plants Were 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.

Ethanol Capacity Growth

0

2

4

6

8

10

12

14

16

1999 2001 2003 2005 2007 2009

billi

on g

allo

ns

Jan. 1 capacity Under construction

Source: Renewable Fuel Association website http://www.ethanolrfa.org/industry/statistics/#B

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

Biofuels Policy

Spot Crude Oil Prices 1995-2009WTI, Monthly Average Price, Cushing, Oklahoma

020406080

100120140160

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

$/ba

rrel

Source: U.S. Energy Information Administration

U.S. Retail Gasoline Prices, All Grades, All Formulations, 1996-2009

050

100150200250300350400450

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

cent

s/ga

llon

Source: U.S. Energy Information Administration

Energy Sources

Ethanol Production, 1980-08

0.01.02.03.04.05.06.07.08.09.0

10.0

1980

1982

1984

1986

1988

1990

1992

1994

1996

1998

2000

2002

2004

2006

2008

Billion

Gallons

Source: Renewable Fuels Association

2007 Renewable Fuels Mandate

05

10152025303540

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

2018

2019

2020

2021

2022

Billi

on G

allo

ns

Corn ethanol Cellulosic Bio-diesel More non-grain

Daily Ethanol Production, 2006-09

250

350

450

550

650

750Ja

nFe

bM

ar Apr

May Jun Jul

Aug

Sep

Oct

Nov

Dec

1000

bar

rels/d

ay

2006 2007 2008 2009

2009 mandated use: avg 685,000 barrels/day

Ethanol Production, 1990-2016

02468

10121416182019

9019

9219

9419

9619

9820

0020

0220

0420

0620

0820

1020

1220

1420

16

Billi

on G

allo

ns

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

Source: U.S. Energy Information Administration

1.50

2.00

2.50

3.00

3.50

4.00

4.50$ Per Gallon

Weekly U.S. Gasoline Prices, 2007-09

Ethanol-Gasoline Price Relationship

0.00.51.01.52.02.53.03.54.04.5

0.5 1.0 1.5 2.0 2.5 3.0 3.5 4.0 4.5 5.0 5.5 6.0Retail Gasoline $/ gal

Etha

nol $

/gal

Source: Ron Plain

Livestock Marketing Information Center

1.401.601.802.002.202.402.602.803.00$ Per Gallon

Weekly Iowa Ethanol Prices, 2007-09

Source: U.S. Energy Information Administration

1.50

2.00

2.50

3.00

3.50

4.00

4.50

Gas

olin

e

1.20

1.40

1.60

1.80

2.00

2.20

2.40

2.60

2.80

3.00

Etha

nol

GasolineEthanol

Weekly Gasoline & Ethanol Prices, Dollars Per Gallon, 2007-09

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

Source: Ron Plain

Omaha Corn PricesWeekly Average, 2007-09

2

3

4

5

6

7

8$ Per Bu.

Source: LMIC

Source: LMIC

2

3

4

5

6

7

$/bu

shel

1.10

1.30

1.50

1.70

1.90

2.10

2.30

2.50

2.70

2.90

$/ga

llon

Corn Ethanol

Weekly Corn & Ethanol Prices, 2007-09

Source: U.S. Energy Information Administration

1

1.5

2

2.5

3

3.5

4

4.5

5

$/ga

llon

2

3

4

5

6

7

8

$/bu

shel

Gasoline Corn

Weekly Gasoline & Corn Prices, 2007- 09

Corn futures

Crude oil

futures

Impact on feed prices

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

Billi

on B

ushe

ls

Forecast

% corn for ethanol:2000-01: 6%2005-06: 14%2007-08: 23%2008-09: 31%2009-10: 34%

Soybean Meal PricesWeekly Average, Illinois, 2007-09

150

200

250

300

350

400

450

500$ Per Bu.

Source: LMIC

1

2

3

4

5

6

7

8

$/bu

shel

100

150

200

250

300

350

400

450

500

$/to

n

CornSB Meal

Weekly Corn & Soybean Meal Prices, 2006-09

Source: LMIC

Livestock Marketing Information Center

ALFALFA HAY - MONTHLY AVERAGE PRICEReceived by Farmers, U.S., Crop Year

120

130

140

150

160

170

180

190

May07 JUL SEP NOV 2008 MAR MAY JUL SEP NOV 2009 MAR

$ Per Ton

Livestock Marketing Information Center

120

130

140

150

160

170

180

190

$/to

n

2.0

2.5

3.0

3.5

4.0

4.5

5.0

5.5

6.0

6.5

7.0

$/bu

shel

Alfalfa Corn

Monthly Corn & Alfalfa Prices, 2007-08

Northwest Iowa Prices, 2006-09

0

50

100

150

200

250

300

10/6

/200

611

/3/2

006

12/1

/200

612

/29/

2006

1/26

/200

72/

23/2

007

3/23

/200

74/

20/2

007

5/18

/200

76/

15/2

007

7/13

/200

78/

10/2

007

9/7/

2007

10/5

/200

711

/2/2

007

11/3

0/20

0712

/28/

2007

1/25

/200

82/

22/2

008

3/21

/200

84/

18/2

008

5/16

/200

86/

13/2

008

7/11

/200

88/

8/20

089/

5/20

0810

/3/2

008

10/3

1/20

0811

/28/

2008

12/2

6/20

081/

23/2

009

2/20

/200

93/

20/2

009

4/17

/200

95/

15/2

009

$ Per Ton

Corn DDGS WDGS

Source: LMIC

DDGS Price as % of Corn Price, Northwest Iowa, 2006-09

65707580859095

100105110115

10/6

/200

611

/3/2

006

12/1

/200

612

/29/

2006

1/26

/200

72/

23/2

007

3/23

/200

74/

20/2

007

5/18

/200

76/

15/2

007

7/13

/200

78/

10/2

007

9/7/

2007

10/5

/200

711

/2/2

007

11/3

0/20

0712

/28/

2007

1/25

/200

82/

22/2

008

3/21

/200

84/

18/2

008

5/16

/200

86/

13/2

008

7/11

/200

88/

8/20

089/

5/20

0810

/3/2

008

10/3

1/20

0811

/28/

2008

12/2

6/20

081/

23/2

009

2/20

/200

93/

20/2

009

4/17

/200

95/

15/2

009

Percent

Source: LMIC

WDGS Price as % of DDGS Price, Northwest Iowa, 2006-08

20

25

30

35

40

45

10/6

/200

611

/3/2

006

12/1

/200

612

/29/

2006

1/26

/200

72/

23/2

007

3/23

/200

74/

20/2

007

5/18

/200

76/

15/2

007

7/13

/200

78/

10/2

007

9/7/

2007

10/5

/200

711

/2/2

007

11/3

0/20

0712

/28/

2007

1/25

/200

82/

22/2

008

3/21

/200

84/

18/2

008

5/16

/200

86/

13/2

008

7/11

/200

88/

8/20

089/

5/20

0810

/3/2

008

10/3

1/20

0811

/28/

2008

12/2

6/20

081/

23/2

009

2/20

/200

93/

20/2

009

4/17

/200

95/

15/2

009

Percent

Source: LMIC

Impact on crop acres

Million Acres Planted by Crop

2006 2007 ChangeCorn 78.327 93.600 + 15.273Soybeans 75.522 64.736 - 10.786Wheat 57.344 60.433 + 3.089Cotton 15.274 10.827 - 4.447Sorghum 6.522 7.718 + 1.196Oats 4.168 3.760 - 0.408 Barley 3.452 4.020 + 0.568 18 crops 255.398 259.428 + 4.030

Million Acres Planted by Crop

2007 2008 ChangeCorn 93.600 85.889 - 7.711Soybeans 64.736 75.878 +11.142Wheat 60.433 63.047 + 2.614Cotton 10.827 9.414 - 1.413Sorghum 7.718 8.327 + 0.609Oats 3.760 3.217 - 0.340 Barley 4.020 4.234 + 0.214 18 crops 259.428 264.740 + 5.312

More planted acres drives up: Seed prices Fertilizer prices Equipment prices Land prices

0

500

1000

1500

2000

250050 54 58 62 66 70 74 78 82 86 90 94 98 02 06

$/acre

U.S. Farmland Values, 1950-2008USDA/NASS

Impact on livestock

U.S. Corn Usage

Feed

Exports

Ethanol

Other

Feed

Exports

Ethanol

Other

2000 crop 2007 crop

U.S. Feeding of Corn, 2005-06

Beef

Poultry

Hogs

Dairy

Other

Source: PRX ProExporter Network

Cost of Slaughter Hog ProductionIowa State University Calculations, 1987-2009

35

40

45

50

55

60

65

1987

1988

1989

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

Marketing Month

$ Per Live Cwt

Source: John Lawrence, Iowa State University

Breakeven Hog Price & U.S. Corn PriceIowa State University Calculations, 1990-2008

37

42

47

52

57

1.5 2

2.5 3

3.5 4

4.5 5

Corn Price

$ Per Live Cwt

Hog Price & Cost, 1996-2008

3035404550556019

9619

9719

9819

9920

0020

0120

0220

0320

0420

0520

0620

0720

08

$/cw

t liv

e

hog $ cost

2008 hog prices were $2.60 above the 13 year average 2008 production cost was $13.85 above the 13 year average

Choice Steer Price & BreakevenS. Plains Cattle Feedlots, Monthly

75

80

85

90

95

100

105

110

2004 2005 2006 2007 2008 2009

$ Per Cwt

Breakeven Projected Breakeven

Source: LMIC

AVERAGE RETURNS TO CATTLE FEEDERSFeeding 725 Lb. Steers, S. Plains, Monthly

-250-200-150-100-50

050

100150200250

1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009

$ Per Head

Source: LMIC

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

Forecast Change in Meat Production --Percent Change-- Type 2007-082008-09

Pork +6.40% -2.45%Beef +0.53% -0.46%Chicken+2.07% -3.88%Turkey +4.94% -7.14%All Meats +2.90% -2.85%

Source: USDA/OCE WASDE, April 2009

Impact on Food Prices

Ethanol’s Impact on Food Prices Less corn for livestock and more for ethanol Less food and more fuel Higher food prices and lower fuel prices

Ethanol’s Impact on Food Prices Primary

Through corn products Secondary

Through animal products Tertiary

Through competitive crops More corn acres = fewer acres for other crops

Food Marketing Bill18.7

8

4

3.5

4.74

3.62.74.31.53.53.1

38.5

Farm ValuePackagingTransportationFuel & ElecPretax ProfitsAdvertisingDepreciationInterestRentRepairsBusiness TaxesOtherLabor

Source: USDA/ERS data for 2002

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.

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%.

Over time, the price of a commodity will equal the cost of production

U.S. Average Corn Price, 1908-2008

0.000.501.001.502.002.503.003.504.004.505.00

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

2008

$ Per Bushel

Source: USDA/NASS

U.S. Average Corn Price, 1908-2008

0.000.501.001.502.002.503.003.504.004.505.00

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

2008

$ Per Bushel

Source: USDA/NASS

1908-194235 years Avg $0.78

1942-1972 30 years Avg $1.26

1973-200634 years Avg $2.37

U.S. Average Corn Price, 1908-2008

0.000.501.001.502.002.503.003.504.004.505.00

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

2008

$ 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?

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

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

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

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

Meat Consumption

U.S. Per Capita Meat ConsumptionRetail Weight, 1960-2008

150

160

170

180

190

200

210

220

230

24060 65 70 75 80 85 90 95 00 05

Pounds

In 2007, the average American consumed 60 pounds (34%) more meat than in 1960

U.S. Monthly Average Soybean Price

456789

1011121314

Jan-

00

Jan

01

Jan

02

Jan

03

Jan

04

Jan

05

Jan

06

Jan

07

Jan

08

Jan

09

Dolla

rs P

er B

ushe

l

Soybean Meal PricesWeekly Average, Illinois, 2007-09

150

200

250

300

350

400

450

500$ Per Bu.

Source: LMIC

Illinois Monthly Soybean Meal Price

100150200250300350400450

2000

2001

2002

2003

2004

2005

2006

2007

2008

Dolla

rs P

er T

on

Cellulosic Ethanol

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, cardboard Grass - switchgrass, corn stalks, straw, fescue Distillers Grains

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

Cellulosic Ethanol

Challenges of cellulosic ethanol Feedstock Purity and consistency Production process By products

Feedstock for Cellulosic Ethanol

Cost competitive cellulosic ethanol plants are not likely to be small or operate part time

Other than wood, most feedstock is bulky, i.e. costly to haul and store

Harvesting is not cheap Opportunity cost, i.e. impact on soil

Nutrients Ground cover

Cellulosic Ethanol

Challenges of cellulosic ethanol Feedstock Purity and consistency Production process By products

Purity and Consistency of Feedstock

The feedstock for a cellulosic ethanol plant will not be pure cellulose collect and move a lot of non-cellulose? corn is consistently ~70% starch

Cellulosic ethanol plant not likely to work well on all potential feedstocks Is there any plentiful, uniform, year-round source

material other than wood (and distillers grain)?

Cellulosic Ethanol

Challenges of cellulosic ethanol Feedstock Purity and consistency Production process By products

Cellulosic Ethanol Production

Two production methods Hydrolysis – breaks the cellulose chain into

sugar molecules that are then fermented to produce ethanol, then distilled

Gasification – ligno-cellulose is transformed into carbon monoxide and hydrogen which are then fed to a special fermenter or a catalyst bed to produce ethanol

Cellulosic Ethanol Production

Two types hydrolysis processes Chemical Enzymatic

Cellulosic Ethanol Production

Chemical hydrolysis – Cellulose is mixed with a mild acid under a lot of

heat and pressure, or a strong acid with less heat and pressure.

Water is then added to form simple sugars. The acid is then neutralized. Sugar is separated from the residual materials. Yeast is added to ferment ethanol which is then

distilled. Acid + heat + pressure = $

Cellulosic Ethanol Production

Enzymatic hydrolysis – Following a pre-treatment process, various

enzymes are used sequentially to break cellulose into glucose molecules, a la rumen bacteria.

The sugar is separated. Yeast is added to ferment ethanol which is then

distilled. Availability and cost of the enzymes are the

primary obstacles to enzymatic hydrolysis

Cellulosic Ethanol Production

Gasification – The cellulose is partially combusted to yield

carbon monoxide, carbon dioxide and hydrogen. The microorganism, Clostridium ljungdahlii,

converts the CO, CO2 and H into ethanol and water.

The ethanol is distilled from the water. An alternative is to use a catalytic reactor to

convert the synthesis gas into alcohol.

Cellulosic Ethanol

Challenges of cellulosic ethanol Feedstock Purity and consistency Production process Byproduct

Byproduct

Corn ethanol plants produce a byproduct, DDGS, that is as valuable as the feedstock

For what price will we be able to sell the byproduct from cellulosic ethanol plants?

Biodiesel

Biodiesel Production

Typically, a fat or oil is reacted with alcohol that contains a catalyst (usually sodium or potassium hydroxide) to produce glycerine and methyl esters or biodiesel.

Biodiesel Production

Methanol + Catalyst

Biodiesel

Reactor

Glycerine

Vegetable Oil

SettlerWashing Neutralization

Purification

Alcohol recovery

Alcohol recovery

Settler Evaporation

Fatty acids

Soydiesel

Although soybean oil is a liquid, you should not blend it with diesel fuel.

The glycerine in soy oil will ruin a diesel engine.

Soy oil must be transesterified before blending with diesel fuel.

Economics of Soydiesel

Soy oil is worth 36¢ per pound Diesel is worth 22¢ per pound Cost of conversion is 8¢ per pound There is a federal government subsidy of

13¢ for each pound of soy oil converted to diesel fuel

Soybean Oil Futures

Biodiesel

The U.S. produces about 3 billion bushels of soybeans per year.

At 11.3 pounds of oil per bushel, this is potentially 33.9 billion pounds of soy oil

At 7.4 pounds per gallon, this is 4.6 billion gallons of soy oil

Feedstock Costs per Gallon of Biofuel Reduced by Federal Tax Credit

Corn price Cost/gallon of ethanol*

$4.00/bu. $1.44

$5.00/bu. $1.80

$6.00/bu. $2.16

Veg. oil price

Cost/gallon of biodiesel**

$0.40/lb. $3.00

$0.50/lb. $3.75

$0.60/lb. $4.50

*Assumes 2.77 gal./bu. of corn **Assumes 7.5 lbs. veg. oil/gallon

Biofuel Conversion Factors, 2012

Crop yield per acre

Vegetable oil yield

Biofuel yield per unit

Biofuel yield per acre

Ethanol from corn 158.6 bu. 2.77 gal/bu 439 gal/ac

Ethanol from sugarbeets 23 tons 24 gal/ton 552 gal/ac

Biodiesel from soybean oil 42.8 bu. 11.3 lbs/bu 7.7 lbs/gal 63 gal/ac

Biodiesel from canola oil 1557 lbs. 0.383 lbs/lb 7.7 lb/gal 77 gal/ac

Crop yields and vegetable oil yields from FAPRI Jan. 2006 baseline for 2012. Biofuel yields are assumptions from various sources

Need for Both Ethanol and Animal Agriculture 100 million gallon ethanol plant

37 million bushels of corn 80 workers directly employed

37 million bushels corn Direct Jobs Farrow-finish 800 Or wean-finish 242 Or beef feedlot 278

Source: Dr. John Lawrence, Head of ISU Beef Center

Impact of Ethanol Building lots of ethanol plants Driving up corn prices

More corn acres Fewer acres of other crops

Higher prices for other crops Record net farm income

Driving up cash rents and land prices Driving up livestock production costs

Less meat, milk and eggs being produced Lots of DDGS will benefit cattle New grain storage/shipping patterns

The New Ag Market?

Crude oil drives ethanol prices Ethanol drives corn prices Corn drives livestock production Livestock production drives meat

prices

Impact on Rural Communities

What Ethanol Plants Need

Corn Water - roughly 4 gallons of water per gallon

of ethanol Heat – usually natural gas Roads & Rails Some space

Ethanol and Rural Jobs

50 million gallon ethanol plant 18 million bushels of corn 35 workers directly employed

18 million bushels corn Direct Jobs Farrow-finish 400 Wean-finish 121 Beef feedlot 139

Source: Dr. John Lawrence, Head of ISU Beef Center

U.S. Net Farm Income 1986-2007

0102030405060708090

10019

86

1988

1990

1992

1994

1996

1998

2000

2002

2004

2006

Billi

on $

Source: USDA/ERS

USDA Farm Payments, 2005-16

0

5

10

15

20

2520

05

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

Billi

on $

actual forecast

Source: USDA/OCE

Impact on Environment

Ethanol: energy gain or loss?The energy gain from ethanol in new dry milled

plants is above 75%. This is higher than in the past because of efficiency gains

On the farm Reduced tillage

In ethanol plants Faster, higher yielding conversion

Greenhouse Gas Emissions Corn Biomass Gasoline Ethanol Ethanol --grams of GHG/MJ of energy-- Feedstock + 4 + 24 + 10 Refining fuel +15 + 40 + 9 Vehicle +72 + 71 + 71 Feedstock Uptake 0 - 62 - 62 Land use change 0 +104 +111 Total +92 +177 +138

Source: Searchinger, et al, Science, February 29, 2008

Source: Takle & Hofstrand, Iowa State University

Recent EPA Decisions

U.S. corn ethanol has a worse impact on the environment than gasoline due to land use impact, i.e. more acres being cropped

Brazilian sugarcane ethanol reduces GHG emissions by 64% compared to gasoline

Impact on Gas Prices

U.S. Gasoline Usage, 1986-07

020406080

100120140160

1986

1988

1990

1992

1994

1996

1998

2000

2002

2004

2006

Billi

on G

allo

ns

Source: U.S. Energy Information Administration

Ethanol Production, 1980-07

0.01.02.03.04.05.06.07.0

1980

1982

1984

1986

1988

1990

1992

1994

1996

1998

2000

2002

2004

2006

Billi

on G

allo

ns

Source: Renewable Fuels Association

Gasoline & Ethanol Production, 1986-07

020406080

100120140160

1986

1988

1990

1992

1994

1996

1998

2000

2002

2004

2006

Billi

on G

allo

ns

ethanol gasoline

Source: U.S. Energy Information Administration

U.S. Gasoline Usage

142 billion gallons gasoline used per year Mandating 10% ethanol in all gasoline would

require that nearly half of the U.S. corn crop be processed into ethanol

If all U.S. corn were made into ethanol, it would produce 33 billion gallons per year

To replace all U.S. gasoline would require 78 billion bushels of corn annually

78 Billion Bushels of Corn

Record U.S. corn yield is 160 bu/acre 78 billion bushels at 160 bu/acre would

require 488 million harvested acres of corn Equals 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.

Questions?