21 richard perrin

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21 richard perrin

  1. 1. Biofuels Impacts on Agriculture and Food Security Richard Perrin Agricultural Economics
  2. 2. US biofuel development has been driven by federal policiesVEETC - $0.50/gal, now $0.45/gal, to expire in Dec, 2011 Paid to motor fuel distributors when ethanol is mixed with petroleum fuel (A similar subsidy, of $1.00/gal, exists for biodiesel)Renewable Fuels Standard (EISA, 2007) Requires distributors to sell minimum quantities of biofuelsWhy? -Reduce greenhouse gas emissions -Reduce dependence on foreign oil -Foster rural development
  3. 3. Renewable Fuel Standard - Energy Indepence and Security Act of 2007 40 Total RFS 35 Corn Ethanol 30 All Advanced Biofuelsbillion gallons per year Cellulosic 25 Biodiesel 20 Jan Corn Eth cap 15 10 5 0 2008 2010 2012 2014 2016 2018 2020 2022
  4. 4. Impacts of the ethanol industry Percent of U.S. Corn Crop to Ethanol 50 45 40 grind capacity, Jan 1 35 actually ground 30percent 25 20 15 10 5 0 1995 2000 2005 2010 crop year
  5. 5. Impacts of the ethanol industry PRICES $6 Ethanol, $/gal (FOB Omaha) $5 Corn, $/bu $4 Land, $/0.001ac (irrig, NE) $3 $2 $1 $0 1998 2000 2002 2004 2006 2008 2010 2012
  6. 6. Impacts of the ethanol industry World increase in grain production and use 300 coarse grains, world prod 250 corn, world prod 200 US ethanol grindMMT 150 100 50 0 2002 2003 2004 2005 2006 2007 2008 2009 2010
  7. 7. Impacts of the ethanol industry U.S. Corn Exports 3 3 2billion bushels 2 as grain exports as DDG exports 1 as ethanol exports total 1 0 2000 2002 2004 2006 2008 2010
  8. 8. Impacts of the ethanol industryFood Security Impact Today of a 40% grain price increase: In the US: Impact on food cost = 1.2% of food expenditures = 0.12% of personal income In one of the poor countries of the world: Impact on food cost = 20% of food expenditures = 15% of personal income
  9. 9. Impacts of the ethanol industryFood Security Impact by 2050 ? – We will need 70% more grain to satisfy population and income increases with no increase in food prices – Can we produce that and more biofuel also? Not likely –rate of yield gains is slowing So prices will rise, creating more food insecurity
  10. 10. But will the ethanol industry even survive without federal policies? Energy Value of Corn Based on Petroleum Price 10 corn energy value w/blend credit 9 8 corn energy value w/o blend credit 7$/bu 6 5 4 3 2 1 0 20 40 60 80 100 120 140 160 Petroleum price, $/barrel, WTI
  11. 11. Concluding …• Ethanol has been great for US crop producers• Ethanol is not a threat to US corn exports• Ethanol is not currently a serious threat to Food Security• But biofuels are a certainly a threat to Food Security in the longer run • Thank you for your attention

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