Economic Sustainability
Chad Hart
Center for Agricultural and Rural Development
Iowa State University
chart@iastate.edu
2007 Biobased Industry Outlook Conference
Ames, Iowa
November 6, 2007
Oil Futures as of 10/31/2007
92
90
88
$ per barrel
86
84
82
80
78
76
74
72
Dec.
2007
Dec.
2008
Dec.
2009
Dec.
2010
Dec.
2011
Dec.
2012
Dec.
2013
ov
-0
Ja 7
nM 08
ar
M 08
ay
-0
Ju 8
l-0
Se 8
pN 08
ov
-0
Ja 8
nM 09
ar
M 09
ay
-0
Ju 9
l-0
Se 9
pN 09
ov
-0
9
N
$ per gallon
Ethanol and Gasoline Futures
2.70
2.50
2.30
2.10
1.90
1.70
1.50
Ethanol
Gasoline
Historical Distillers Grains Prices
$140.00
$130.00
$120.00
$110.00
$100.00
$90.00
$80.00
$70.00
$60.00
$50.00
$40.00
04/19/01
09/01/02
01/14/04
05/28/05
10/10/06
02/22/08
9/
1/
2
10 00
/1 6
/2
11 00
/1 6
/2
12 00
/1 6
/2
0
1/ 06
1/
20
2/ 07
1/
20
3/ 07
1/
20
4/ 07
1/
20
5/ 07
1/
20
6/ 07
1/
20
7/ 07
1/
20
8/ 07
1/
20
9/ 07
1/
10 200
/1 7
/2
00
7
$ per bushel
Nearby Corn Futures Prices
4.50
4.00
3.50
3.00
2.50
2.00
Corn Futures as of 10/31/2007
4.40
$ per bushel
4.20
4.00
3.80
3.60
3.40
Dec. 2007
Dec. 2008
Dec. 2009
Dec. 2010
Ethanol Gross Margin
Net Cost of Corn
Cost of Nat. Gas
9/21/2007
7/21/2007
5/21/2007
3/21/2007
1/21/2007
11/21/2006
9/21/2006
7/21/2006
5/21/2006
3/21/2006
1/21/2006
11/21/2005
9/21/2005
7/21/2005
5/21/2005
3/21/2005
$ per gallon
Historical Ethanol Gross Margins
4.50
4.00
3.50
3.00
2.50
2.00
1.50
1.00
0.50
0.00
Projected Ethanol Gross Margins
2.00
1.80
1.60
$ per gallon
1.40
1.20
1.00
0.80
0.60
0.40
0.20
0.00
Dec- Feb07
08
Apr08
Jun08
Aug08
Oct08
Ethanol Gross Margin
Dec- Feb08
09
Apr09
Net Cost of Corn
Jun09
Aug09
Oct09
Cost of Nat. Gas
Dec09
Projected Utilization of U.S. Corn
million bushels
7000
6000
5000
4000
3000
2000
1000
0
2006
2007
Feed
2008
2009
Fuel
2010
HFCS
2011
Seed
2012
2013
Food, Other
2014
Exports
2015
2016
Projected U.S. Dry Mill Margins
US$/bushel
1.60
1.40
1.20
1.00
0.80
0.60
0.40
0.20
0.00
2006
2008
2010
2012
2014
-0.20
-0.40
Margin Over Operating Costs
Margin Over Total Cost
2016
Projected U.S. Ethanol Production
billion gallons
16
14
12
10
8
6
4
2
0
2006
2008
2010
2012
2014
2016
Comparing This Year to Last
Jan. – Sept. 2006
Jan. – Sept. 2007
Ethanol Yield
(gallons/bushel)
2.61
2.69
Ethanol Revenue
($/gallon)
2.20
2.13
Corn Cost
($/gallon)
0.85
1.41
Co-product Revenue
($/gallon)
0.41
0.48
Commodity Spread
($/gallon)
1.76
1.20
Conversion Cost
($/gallon)
0.67
0.60
Distribution Cost
($/gallon)
0.15
0.17
Net Return
($/gallon)
0.94
0.43
Source: Aventine Renewable Energy Holdings, Inc. 3rd Quarter
Report, 2007
Outlook Factors
 National, state, and local energy policies
 Changes in general economic conditions
 Overcapacity within ethanol, biodiesel, and petroleum




refining industries
Availability and costs of products and raw materials
Energy prices
Value of co-products
Availability of transportation resources (rail, barge, etc.)
Source: Aventine Renewable Energy Holdings, Inc. 3rd Quarter
Report, 2007
Thank You