Department of Agricultural Economics

Purdue University

Biofuel Implications for Agriculture

and the Environment

Otto Doering

Purdue University

March 2008
Department of Agricultural Economics

Purdue University 2

9.0

15.0

5.4

7.7

0

2

4

6

8

10

12

14

16

2006 2008 2010 2012 2014 2016 2018 2020 2022

Energy Independence and Security Act of 2007

Energy Policy Act of 2005

Billion gallons

Note: RFS levels under the Energy Policy Act of 2005 are projected for 2013 and beyond based on the act’s provisions and growth in motor 

gasoline consumption for transportation projected by the Energy Information Administration in Annual Energy Outlook 2008. 

Renewable Fuel Standards (RFS)

Corn starch based ethanol, 2006 through 2022
Department of Agricultural Economics

Purdue University

3

Expansion of U.S. Ethanol Production Capacity 

Well Ahead of 2007 RFS Requirements

0

2

4

6

8

10

12

14

 Sep-06 Dec-06 Mar-07 Jun-07 Sep-07 Dec-07 Mar-08 Jun-08 Sep-08

Billion gallons

2008 RFS

2009 RFS
4

4.1

3.2

5.6

31 %

0.0

1.0

2.0

3.0

4.0

5.0

6.0

1995/96 1999/00 2003/04 2007/08F 2011/12* 2015/16*

Bil. bushels

0

5

10

15

20

25

30

35

Percent

Ethanol corn use

Ethanol share of corn use

Note: 2007/08 is projected based on the World Agricultural Supply and Demand Estimates, February 8, 2008. 2008/09 is projected based on 

USDA’s Grains & Oilseeds Outlook, Agricultural Outlook Forum, Washington, D.C., February 22, 2008. *Projection for 2009/10 based on RFS 

mandates for corn starch based ethanol under the Energy Independence and Security Act of 2007.

U.S. Corn Used for Ethanol

1995/96 through 2015/16*
2.91

3.19

3.47

3.75

4.03

4.31

4.59

4.87

5.15

5.43

5.71

5.99

$2.50

$2.75

$3.00

$3.25

$3.50

$3.75

$4.00

$4.25

$4.50

$4.75

$5.00

$5.25

$5.50

$5.75

$6.00

$6.25

$1.40 $1.50 $1.60 $1.70 $1.80 $1.90 $2.00 $2.10 $2.20 $2.30 $2.40 $2.50

B

r

e

a

k

e

v

e

n

C

o

r

n

P

ric

e

/

B

u.

Ethanol Price/Gallon Plant

Estimated Ethanol Plant Breakeven Corn Purchase 

Assumes: January 2008 Price

-Construction cost = $1.90/gal of 

capacity

-Ethanol Yield = 2.8gal/bu.

-Natural Gas = $7.50/mbtu

-Propane = $1.65/gal

-Wholesale gasoline = $2.50 

-Dry Distillers $160/ton
6

Major Crop and CRP Acreage 

(USDA Outlook Forum – Feb. 2008)

2007/08 2008/09 Change

Million acres

Corn 93.6 90.0 -3.6

Soybeans 63.6 71.0 +7.4

Wheat 60.4 64.0 +3.6

All Cotton 10.8 9.5 -1.3

Rice 2.76 2.70 -0.1

5-crop total 231.2 237.2 +6.0

CRP acres 36.8 34.8 -2.0
7

New-crop Soybean/Corn Price Ratios

2007-crop and 2008-crop to date

1.90

2.00

2.10

2.20

2.30

2.40

2.50

2.60

2.70

1-Sep 1-Oct 1-Nov 1-Dec 1-Jan 1-Feb 1-Mar 1-Apr 1-May 1-Jun 1-Jul 1-Aug

Soybean/corn Nov 2007 Soybeans/Dec 2007 Corn Futures

Nov 2008 Soybeans/Dec 2008 Corn Futures

Note: Chicago Board of Trade daily settlement prices. 
8

Biodiesel Margin

-100

-50

0

50

100

150

Jun-06 Oct-06 Feb-07 Jun-07 Oct-07 Feb-08

cents/lb

SBO costs 

exceed $4/gal
Agricultural and Energy Historic

Price Correlations

Data Pair Correlation Coefficient

Crude-gasoline 0.98

Crude-ethanol 0.88

Gasoline-ethanol 0.86

Ethanol-corn 0.25

Crude-corn 0.16

Crude-soybeans 0.13

Corn-soybeans 0.72
1.05 0.82 0.61 0.42 0.23

Cost Competitiveness of 

Cellulosic Ethanol, Feb. 2007

Corn 

Based

Cellulosic 

Today?--

Illustrative

Cellulosic 

2010-12—

DOE target

Feedstock $1.17

@$3.22/bu

2.75g/bu

$1.00

@$60/dt

60g/dt

$0.33

@$30/dt

90g/dt

By-Product -$0.38 -$0.10 -$0.09

Enzymes $0.04 $0.40 $0.10

Other Costs** $0.62 $0.80 $0.22

Capital Cost $0.20 $0.55 $0.54

Total $1.65 $2.65 $1.10

** (includes preprocessing, fermentation, labor)
Biofeedstock Costs Including 

One –Way Transportation

Draft estimates not for attribution

Department of Agricultural Economics

Purdue University

5 Miles $35.64 5 Miles $66.02

15 Miles $36.09 15 Miles $67.51

25 Miles $38.34 25 Miles $69.01

35 Miles $39.84 35 Miles $70.51

45 Miles $41.34 45 Miles $72.01

Corn Stover Switch Grass
Water Quality Issues

for Biofuels

•It Depends

•Location, Location, Location

Department of Agricultural Economics

Purdue University
CO2 Issues 

•Consistent standards

•Where one draws the envelope

Department of Agricultural Economics

Purdue University