1. Bioenergy: Where We Are and Where We Should Be Daniel G. De La Torre Ugarte Chad M. Hellwinckel

2. Where we are: Longer term:  30 years of chronic low prices.  culture dependent upon fossil fuels. Recently:  Current high commodity prices.  Criticism of biofuels policies.

3. Where we are: Corn = $5.80 Wheat = $7.98 Soybeans = $13.93 Rice = $17.55 Cotton = $0.689 September delivery Commodity prices on the rise

4. Where we are: Long term trends Source: International Financial Statistics Online, IMF February 10,2008. Except for real price in 2007, which is estimated by author. 30+ years of declining and or flat prices

5. Where we are: Agriculture and Poverty  Developing world 5.5 billion people 2.5 billion are in households involve in Ag 1.5 billion are smallholder households  800 million people food insecure  80% of food insecure people are in rural areas  In many developing countries: >50% of employment in agriculture >25% of GDP from agriculture  Increase in GDP from Ag is twice as efficient for poverty reduction than any other sector. (2008 World Bank Development Report)

6. Energy Output to Input  Egypt (Historical) = 1.8  Afghanistan (today) = 2.9  U.S. (1920) = 3.1  U.S. (1974) = 0.7 Where we are: Energy Production through Agriculture Created Civilization Now using more energy than creating

7. Where we are: Global Oil Situation Challenge of agriculture is to, once again, be a net SOURCE of energy.

8. Where we want to be:  Maintain higher price levels than historical trend, while avoiding price spikes.  Transform agriculture into a net energy source once again. While…  Improving soil health.  Providing adequate food to all.

9. Not all Biofuels are “created” equal Advantages of Dedicated Energy Crops:  Does not have to compete directly with food crops for land resources  = fewer price spikes  Perennial grasses, fewer field operations, lower chemical and fertilizer use  = better energy conversion (EROEI 1.8 to 8)  Perennial grasses, root structure  = improved soil + carbon sequestration  Bulky, therefore production dispersed  = value-added spread throughout growing regions

10. The Energy Bill Energy Investment and Security Act of 2007

11. How fast will cellulosic grow? Advanced Movement Legislated Standard Assumptions 15 bil. from corn 13.5 bil. from corn 9.8 bil. from corn  Legislated: Mandates the production of 21 billion gallons of non-corn ethanol.  Standard Assumptions: Model chooses most cost efficient feedstock for ethanol production  Advanced Movement: improve yields of switchgrass by 1.5% per year reduce conversion costs by 20% by 2022 17 bil. 9.4 bil. 8.2 bil.

12. How fast will cellulosic grow?  ‘Advanced Movement’ Scenario: Reduces pressure on food crops Reduces cost of ethanol production Projected drop corn price

13. How fast will cellulosic grow? Dedicated crop price moves to above $40 per dry ton in all scenarios. Standard=$1.47/gal Legislated=$1.49/gal Advanced=$1.31/gal Dedicated energy crop price Cost of ethanol production

14. Projected Bio-energy Dedicated Crop Acreage under EISA, 2025 Source: POLYSYS model, Agricultural Policy Analysis Center, University of Tennessee

15. Projected Acreage Converted from Cropland to Dedicated Crop Production under EISA, 2025 Source: POLYSYS model, Agricultural Policy Analysis Center, University of Tennessee

16. Conclusions  Investments in dedicated energy crops could: lower commodity price spikes while increasing prices above historic trend. first step in the transformation of agriculture into a source of energy (once again).

17. Department of Agricultural Economics, Institute of Agriculture University of Tennessee http://www.agriculture.utk.edu/ Agricultural Policy Analysis Center http://agpolicy.org/ Thank you ! Bio-based Energy Analysis Group http://beag.ag.utk.edu/

18. Projected Acreage Converted from ‘cropland in pasture’ to Dedicated Crop Production under EISA, 2025 Source: POLYSYS model, Agricultural Policy Analysis Center, University of Tennessee

19. Biofuels Expansion took-off when S/U ratios were declining Source: USDA

20. Animal feed has been driving growth in world demand for grains & protein Source: OECD-FAO Agricultural Outlook 2007-2016 - OECD © 2007 - ISBN 9789264025097 Feed long term driver of ag. demand Biofuels demand, the straw that broke the camel’s back Developing countries are reproducing diet of the west based on high content of animal protein

21. Commodity Prices on the Rise! Corn = $5.20 Wheat = $10.36 Soybeans = $13.98 Rice = $16.34 Cotton = $0.695 March delivery

22. Global Anthropogenic GHG Emissions Source: Fourth Assessment Report, IPCC (2007) (a) Global annual emissions of anthropogenic GHGs from 1970 to 2004. (b) Share of different anthropogenic GHGs in total emissions in 2004 in terms of CO 2-eq. (c) Share of different sectors in total anthropogenic GHG emissions in 2004 in terms of C0 2-eq (Forestry includes deforestation.) 0.26% Searchinger, et al. GHG for ag and forestry is to address the 31% of annual emissions coming. If we take care of this we take care of

23. Biofuels Opportunity  Transportation Fuels Consumption: Gasoline: 21 m barrels / day (Ethanol 3%) Diesel: 21 m barrels /day (Biodiesel 0.2%)  Equivalent of: Ethanol: 30 million barrels / day Biodiesel: 23 million barrels / day  Hypothetically: Ethanol: 300m ha of sugar or 590m of corn Biodiesel: 225m ha of palm