1. Iowa State University Extension Dr. Robert Wisner: Grain Outlook
Dr. Robert Wisner, University Professor
& Extension Economist
Dr. Robert Wisner: Grain Outlook
3/15/06
Future Size of the Iowa Ethanol Industry
2/07/07

2. The Corn Market Setting for 2006-07
Second-highest U.S. yield/A. on record
Corn crop billion bushels below expected demand (2nd year of short-fall vs. demand)
Corn processing for ethanol to be up 34% from
Plants under construction have 2.13 Bil. Bu. capacity – all should be on line in months
Corn processing increases next 2 years likely percent per year (55% of ’06 Crop by 2010)
Iowa top ethanol producing state
World grain stocks low

4. Ethanol Economics $0.10 increase in ethanol price raises
break-even Corn price $0.28/bu.
$1.00 rise in corn price increases cost/gal. $0.36
Ethanol prod’n cost $1.30/gal. corn)
Cost increases about $0.36/gal. for each $1 increase in corn
1/29/07 ethanol price: $1.91/gal.
December 06 margins: $0.64/gal. (incl.$.51credit)
1/29/07: Drops to corn price of about $3.70 corn in IA ($4.10 with USDA costs)
Other variables: DDGS price, Natural Gas

5. Late Dec. ‘06
1/29/07

8. Iowa Corn Processing Plants
Annual Capacity
Operating Plants mil. bu.
Expanding Plants
New, Under Construction
Planned ,246
Potential total rated capacity 2,761 mil. bu.
Equals 137% of 2006 Iowa Corn Crop
1/29/07

10. 69 Potential Iowa Plants
11 Just across IA Borders
Capacity: 137% of 2006 Crop
Iowa Corn Processing Plants, Current & Planned, 2/02/07

12. *Needed corn Acres @ 188 bu./A. state avg. in 2010

14. Figure 2.
8/30/06

15. With Excellent Weather
U.S. Corn Acres Needed, 2007?
Production deficit: 2006 = 1,300 mil. Bu.
New ethanol demand (45-50% of current construction): 950-1,060 mil. Bu.
Export + feed shrinkage: mil. Bu.?
Total short-fall: 1,850 to 1,960 mil. Bu.
Potential carryover decrease, ’07-08: 0.0
Needed extra harv. acres: Mil. 160 Bu./A. on all acres (U.S. +13% to +14%)
Still Leaves Potential Very Tight Supply
With Excellent Weather

16. Needed Yld. @ current Acres

17. How Much More Construction to Reach 5.5 Bil. Bu. Corn for Ethanol?
Estimated corn for ethanol:
Bil. Bu.
Processing capacity under construction:
Bil. Bu.
Plants breaking ground & soon to build:
Bil. Bu.
Total: Bil. Bu.
Capacity yet to break ground to reach 5.5 Bil. Bu.:
0.92 Bil. Bu.
Total U.S. Planned & Proposed Plants
not Included Above: Approx Bil. Bu.

18. Potential production 46.8 Mil. T.
5.5 Bil. Bu for ethanol
Potential U.S. DGS demand by 20
Potential U.S. DGS demand by 2012
20% of ration 7.1 mil. T.
20% of ration mil. T.
Hogs @
15% of ration mil. T.
Total mil.T.
Potential production
Potential production Mil. T.
With 6.5 bil. Bu.: 51.8 Mil. T

21. U.S. Annual Average Corn Price, 1908-2005
30 years
Avg $1.26
35 years
Avg $0.78
33 years
Avg $2.37
Data Source: USDA/NASS

22. * Included in Food, Ind. & Seed

24. Implications of Emerging Energy Market
A lot more corn acres will be needed
Corn prices: increasingly volatile & weather-sensitive
Basis opportunities will be greater
More storage, handling capacity needed
Winter & spring : look for periods of higher corn, SB prices, strong basis
Cautions about selling 2008 and later crops
Corn, biodiesel to pull bean prices up
Options may be useful in managing risks
Rent & Land Value Implications

25. Key Issues for Agriculture
Alternative feedstocks: which ones, how soon? Biomass, sweet sorghum, sugar beets, high-oil crops, cane sugar, others
Differential impacts on livestock & poultry species
Environmental: continuous corn, off-take of biomass, erosion-prone land
Efficient use of distillers grain, including new uses
Risk Management: livestock, crops, ethanol

26. Key Issues for Agriculture, II
Future transition of corn-ethanol plants to other feedstocks
Policy issues: import tax, blending credit, LDPs, CCPs, E-85 vs. E-10, pipeline possibilities, vehicle redesigning, Hydrogen sources
Global developments: EU biodiesel, Brazil export potential, Asia, S. Africa bioenergy & global grain supply, demand & prices
Infrastructure needs: grain handling & storage, transportation, ethanol & ddgs transport
High Prices encourage oil exploration & conservation

27. Should you shift bean acres to corn?
Market says yes
How much yield drag?
Impacts of shorter planting & harvest seasons?
Ability to move, handle, & store more corn?
Soil types?
Availability of top corn seed varieties?

28. What Could Change These Prospects?
Accelerated corn yield increases
Crude oil price collapse
Break-through in economical biomass conversion
Ethanol import tax removed – longer term impacts
$0.51 blending credit reduced
Declining livestock feeding

29. Source: Dr. John Lawrence, ISU Extension Economist & Director, Iowa Beef Center