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Ethanol’s growth and implications for grain producers
Next year’s corn prices will depend on this year’s acreage, economist says

Robert Wisner, Iowa State University Department of Economics
Midwest agriculture is in the midst of a rapid shift from primarily a food producer to being a major source of energy as well. Exceptionally high world crude oil prices in the last three years have brought huge investments in ethanol plants throughout the Midwest and even in areas far from the Corn Belt.

In Iowa, combined corn processing capacity for ethanol and other corn products will soon be equivalent to more than half of the 2006 Iowa corn crop. If all planned plants are built, processing capacity would be equivalent to 133% of last year’s crop — within three to five years. At the national level, existing processing capacity and plants under construction or being expanded will likely boost total capacity to the equivalent of about 40% of last year’s corn production — within the next 15 to 18 months. If all planned and proposed corn-based plants in the United States were built, corn processing capacity would exceed the 2006 U.S. crop by at least one-fifth. Current returns for processing corn into ethanol are quite favorable.

Until the economics of converting corn to ethanol deteriorate through higher corn prices and lower ethanol prices, the expansion is almost certain to continue. Because of limited crop acreage, U.S. processing of corn for ethanol appears likely to reach an upper limit of about 5.5 billion bushels by the end of this decade. If crude oil prices were to fall sharply, the upper limit would be a bit lower. Crude oil prices have been drifting lower in recent weeks, but both the U.S. Department of Energy and the New York futures market expect the decline to end soon, with prices trending upward in the years ahead.
(12 Feb 2007)

Brazil sees biofuel demand as unsustainable

World Poultry Net
Loek Boonekamp, head of the OECD´s commercial and marketing division told attendees at Agra FNP’s Outlook Brazil conference in Sao Paulo that plans to boost biofuel production, often cannot be justified in economic terms and may be unsustainable.

General Manager of Business for China Tex, Liones Severo, thinks the importance of preventing the world´s climate from deteriorating further justifies the increased use of biofuels.

Boonekamp feels that biofuel production will be damaging to the animal feed and meat industries. Even if the oil price fell to the point that it was no longer economic to make biofuels from grains or oilseeds, which stands at about US$90 per barrel in the EU (US$60 in the US), the decision to go ahead has been taken. The consequences will have to be lived with, even though it will prove to be unsustainable, he added.

The picture is not entirely negative as far as animal feed is concerned, Emma Cardy-Brown of Rabobank said. Although the price of maize will certainly increase as more is used to make ethanol, huge amounts of distillers grain, a by-product of ethanol production, will become available. This, as well as soymeal, can be used to feed cattle and pigs and is likely to fall in price.
(14 Feb 2007)
The publication in which this article appears is the “International Magazine on Poultry Production.”

Biofuels Will Make China, India More Thirsty: Andy Mukherjee

Andy Mukherjee, Bloomberg
If water were a globally traded commodity, with unmet demand in China and India reflected in its price, the world might shed its newfound craze for biofuels.

It is bad enough that some of us need ethanol distilled in Scotland to lubricate our evenings.

Growing corn to make ethanol to run sport-utility vehicles is downright silly; nowhere more so than in China and India.

As many as 400 Chinese cities are facing water shortages; farmers in the most-populous nation are forgoing millions of tons of grain production every year. Per-capita availability of water is expected to shrink to alarming levels by 2030.

How serious is the shortage?

“The only thing that worries me about the China story is the water problem,” commodities investor Jim Rogers, chairman of Beeland Interests Inc. in New York and a fan of China, said this week at a press conference in Melbourne.

“If China cannot solve the water problem, that could be the end of the story,” said Rogers, who co-founded Quantum Fund with George Soros and then went biking around the world.
(8 Feb 2007)

RFA’s Bob Dineen says Bush admin’s farm bill proposal not adequate for cellulosic
(video and transcript)
Monica Trauzzi:, E&E TV
With the president calling for an increase in alternative fuels use to 35 billion gallons within a decade and the farm bill up for consideration this year, both Congress and the administration are putting a major focus on the research and promotion of renewable fuels. During today’s OnPoint, Bob Dineen, president of the Renewable Fuels Association, discusses the specifics of the administration’s farm bill proposal and talks about whether or not it provides adequate funding to move beyond grain-based ethanol. Dineen discusses the difficulties of convincing retailers to sell E85 and talks about the future potential of creating an infrastructure to move E85 throughout the country.
(14 Feb 2007)