**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** 

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## 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 Ene rg y In de pe nd en ce a nd Se cu rit y Acto f 2 007 Ene rg y P ol icy Acto f 2 005 

### Bi llio n ga llo ns

Note: RFS levels under the Energy P olicy Act of 2005 are projected for 2013 and beyond based on the act’s provisions and growth in m otor gasoline consumption for transportation projected by t he Energy

I nformation Adm inistration in Annual Energy Outlook 2008 . 

# Re newable 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** 

**Se p-**  **06 D**  **ec-06 Ma**  **r- 07**  **J un-**  **07 Se**  **p- 07**  **D ec-07**  **Ma r-**  **08 J**  **un- 08**  **Se p-**  **08 Bi**  **llio n gal**  **lo ns** 

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** * **Bi l. bus**  **he ls** 

**0 5**  **10 15**  **20 25**  **30 35**  **Pe rcen**  **t** Ethanol co rn u se Ethanol sh are of

cor n us e

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, W ashington, D.C., February 2 2, 2008. *Projection for 2009/10 based on RFS ma ndates for corn starch based ethanol under the Energy I ndependence 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** **r i** **c e** **/ B** **u .** 

**Ethanol Price/Gallon**  **Plant** 

## Estimated Ethanol Plant Breakeven Corn Purchase **Price Assumes:**  **January 2008** 

- 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

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# Ma **jor 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** 

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# 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-O ct**  **1-N ov**  **1- Dec**  **1-Jan 1-**  **Feb 1-**  **Mar 1-**  **Ap r**  **1-M ay**  **1-Ju n**  **1-Ju l**  **1- Au**  **g Soybean/**  **cor n**  **No v**  **2007 Soybeans/**  **Dec 2007**  **Corn Fut**  **ures No**  **v 2008**  **Soybeans/ Dec**  **2008 Corn**  **Fut ures** 

Note: Chicago Board of Trade daily s ettlem ent prices.

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# Biodiesel Margin

**-1 00**  **-5 0**  **0 50**  **100 150** 

**Ju n-0**  **6 Oct**  **-0 6**  **Fe b-0**  **7 Ju**  **n- 07**  **Oct -0**  **7 Fe**  **b- 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

### 0.23 0.42 0.61 0.82 1.05

# Cost Competitiveness of **Cellulosic Ethanol, Feb. 2007**

**Corn Based**  **Cellulosic**

**To day**  **? --**  **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 Enzy**  **mes $0.04**  **$0.40 $0.10**  **Other Costs  ** $0.62** **$0.80 $0.22**  **Capital Cost $0.20**  **$0.55 $0.54**  **To tal**  **$1.65 $2.65**  **$1.10  (includes pr eprocessing , 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**

# CO **2** 

# Issues

• Consistent standards • Where one draws the envelope

**Department of**  **Agricultural Economics** 

**Purdue University**