Outlook for Biofuel Feedstock Supply Tom Capehart Senior Economist, - - PowerPoint PPT Presentation

Outlook for Biofuel Feedstock Supply

Tom Capehart

Senior Economist, USDA-ERS

Biofuels in AEO2013 Workshop U.S. Energy Information Administration March 20, 2013

Introduction

• Ethanol is a Major Use for Corn
• The U.S. corn market has been transformed by

ethanol.

• This season, projected corn for ethanol,

accounts for 40.0% of the total use.

• Feed and residual, historically the leading use

for corn, is projected at 40.4%.

• Current tight corn supply is expected to ease

in coming years with increased corn production.

2 4 6 8 10 12 14 16 1985/86 88/89 91/92 94/95 97/98 2000/01 03/04 06/07 09/10 12/13

Feed and residual Exports FSI less ethanol Ethanol Ending stocks

Source: USDA, World Agricultural Outlook Board, WASDE.

U.S. corn utilization

• Bil. bu

1,000 2,000 3,000 4,000 5,000 6,000 1988/89 91/92 94/95 97/98 2000/01 03/04 06/07 09/10 12/13

U.S. corn use for ethanol

Source: USDA, World Agricultural Outlook Board, WASDE.

• Mil. bu

1 2 3 4 5 6 7 8 500 1,000 1,500 2,000 2,500 1992/93 94/95 96/97 98/99 2000/01 02/03 04/05 06/07 08/09 10/11 12/13

Source: USDA, World Agricultural Outlook Board, WASDE.

U.S. corn prices reach record highs as stocks remain tight

• Mil. bu

Dol./bu

Corn ending stocks (left axis) Season average corn price (right axis)

What is the Baseline?

• 10 year annual projections for agriculture

– Long-term projections made in conjunction with Department’s budget baseline projections – Departmental annual long-term projections publication in February – Covers major U.S. and international agricultural markets

• Projections, not forecasts

– Conditional, long-run scenario – Neutral assumptions for macro, policy, weather

• Prepared by USDA interagency committees

– Composite of models & judgment-based analysis

Baseline Assumptions

• Neutral assumptions

– Normal weather – Agricultural policy

• Continuation of current farm policies

– Macroeconomic conditions

• No business cycles

Baseline Coverage

• Covers major agricultural commodities

– Domestic markets

• Supply, use, and prices

– International markets and trade

• Includes aggregate agricultural sector

measures

– Food prices – Farm income – Agricultural trade value

USDA Interagency Process

• 12 interagency commodity committees

– 4 to 5 agencies on each committee – Short-term projections, monthly – Long-term baseline projections, annually – Meetings to reach consensus projections – Chaired by the World Agricultural Outlook Board

• Much interaction and flow of information between

interagency committees

– Consistency checks

• Interagency baseline committee

– 10 agencies – Coordinates baseline process – Assumptions, review, clearance

Baseline Projection for Corn Impacted by Ethanol Market

• Ethanol production expansion to slow

through 2023

– Reflects declining overall U.S. gasoline consumption

• Most gas is 10% ethanol blend
• Projection incorporates infrastructural and
• ther growth constraints in the E15 market

– E85 market is taken into account

• About 35 % of total corn use expected to go

to ethanol production through 2023.

1 2 3 4 5 6 7 1990 1995 2000 2005 2010 2015 2020

U.S. corn: Feed and residual use, ethanol, and exports

Billion bushels Feed and residual use Exports Ethanol

Source: USDA Agricultural Projections to 2022, February 2013.

1 2 3 4 5 6 1990/91 1995/96 2000/01 2005/06 2010/11 2015/16 2020/21

Crop year

U.S. corn use projections:

Corn-based ethanol expansion slows

Billion bushels

Source: USDA Agricultural Projections to 2022, February 2013.

Soybean Oil Baseline Projection

• Soybean oil used to produce methyl esters (biodiesel)

in the United States to grow 6.3 billion pounds by 2023

• Represents about 29% of total use of U.S. soybean
• il
• Forecast production of 800 million gallons of soy-

based biodiesel by 2022

• Government mandates spur growth
• 2013: 1.28 million gallons of biomass-based diesel
• Renewable Fuel Standard’s advanced biofuel

mandate (3.75 bil. gal in 2014, 21 bil. gal in 2022).

Soybean Oil Baseline Projection

• Corn oil co-products from ethanol plants (including

corn oil extracted from distillers grains), other first-use vegetable oils, animal fats, and recycled vegetable oils are also used as feedstocks to produce biodiesel

• Growth in the food use of soybean oil slows as

projected imports expand for other vegetable oils

5 10 15 20 25 2000/01 2005/06 2010/11 2015/16 2020/21

Crop year

U.S. soybean oil use projections:

Million pounds Total use Biodiesel

Source: USDA Agricultural Projections to 2022, February 2013.

Summary

• Return to normal corn yields will alleviate

current tight supplies and ethanol production will rebound.

• Declining gasoline consumption will slow

future ethanol expansion.

• Soy-based biodiesel production boosted by

mandate.

• Biodiesel will be used to meet advanced

mandate.