Department of Economics Crops & Biofuels: Policies, Outlooks, and Debates Chad Hart Iowa State University Iowa Farm Bureau West Des Moines, Iowa August 14, 2008

Department of Economics Renewable Fuels Standard (RFS)

Department of Economics Government Policies for Ethanol  Ad valorem tariff of 2.5%  Import duty of $0.54 per gallon  Volumetric Ethanol Excise Tax Credit (VEETC)  $0.51 per gallon in 2008  $0.45 per gallon in 2009

Department of Economics Impacts of Removing Ethanol Support Source: McPhail and Babcock, June 2008

Department of Economics Population (billion) World6.678World7.601World9.393 China1.330China1.431India1.808 India1.148India1.362China1.424 U.S.0.304U.S.0.336U.S Indonesia0.238Indonesia0.268Nigeria0.357 Brazil0.192Brazil0.212Indonesia0.313 Pakistan0.168Pakistan0.204Bangladesh0.280 Bangladesh0.154Bangladesh0.190Pakistan0.278 Russia0.141Nigeria0.184Brazil0.228 Nigeria0.138Russia0.132Congo0.189 Source: U.S. Bureau of the Census, International Data Base

Department of Economics Real GDP Sources: International Financial Statistics, Global Insight

Department of Economics Per Capita Meat Consumption Source: FAPRI

Department of Economics Liquid Fuel Usage Source: U.S. Dept. of Energy, Energy Information Administration (Million Barrels Oil Equivalent per Day)(Percent of 2004 Value) United States %109%115%121%129% Canada2.3100% 104% Mexico2.0110%115%130%135%145% Europe15.699% 100%101% Japan5.496% China6.4147%164%186%213%245% India2.5108%128%144%160%176% Africa2.8118%139%154%164%175% Central and South America5.4120%137%152%167%180% World %118%126%134%143%

Department of Economics Crude Oil Prices Source: U.S. Dept. of Energy, Energy Information Administration

Department of Economics Countries Pursuing Biofuels  US  Brazil  Argentina  Colombia  Paraguay  Canada  Uruguay  Mexico  Thailand  New Zealand  South Africa  South Korea  Philippines  Indonesia  Pakistan  China  India  Malaysia  Australia  Japan  EU  Russia  Not a complete list

Department of Economics Price Ratios (Jan. 2, 2008 = 1) Sources: CBOT and NYMEX nearby futures

Department of Economics Exchange Rate Ratios (Jan = 1) Source: USDA-ERS

Department of Economics Exchange Rate Ratios (Jan = 1) Source: CME futures

Department of Economics Nearby Corn Futures Source: CBOT nearby futures

Department of Economics Nearby Soybean Futures Source: CBOT nearby futures

Department of Economics Hay Acreage Source: USDA-NASS

Department of Economics CRP Expiring Contracts Source: USDA-FSA

Department of Economics Land Availability Data from 1997 and 2002 Census of Agriculture Land in farms Total cropland Harvested cropland Cropland in pasture Other cropland Total woodland Pastureland (not crop) Land in other uses Source: USDA-NASS

Department of Economics Corn Supply and Use Source: USDA

Department of Economics Soybean Supply and Use Source: USDA

Department of Economics Corn & Soybean Area Source: USDA-NASS

Department of Economics Corn & Soybean Area Growth rate of 1.5 million acres per year

Department of Economics Input Costs Source: USDA, Agricultural Prices, July 31, 2008

Department of Economics Stocks-to-Use Ratios

Department of Economics Acreage Competition for 2009  More land will shift to corn and soybeans  High prices for both crops  Tight stock situations  Demand remaining fairly strong  Futures price ratios favor corn (8/13/08)  Dec Corn = $5.99 per bushel  Nov Soy = $12.84 per bushel  Current ratio = 2.14  Historical average ratio ~ 2.3