EXHIBIT 99.2
An FCStone Group, Inc. Company
2206 Eastland Drive
Building 200, Suite 201
Bloomington, Illinois 61704
Phone: (309) 664-5604; Fax: (309) 664-5095
2206 Eastland Drive
Building 200, Suite 201
Bloomington, Illinois 61704
Phone: (309) 664-5604; Fax: (309) 664-5095
January 3, 2006
TO: | Mr. Steve Dietz | |
Hometown Energy, LLC | ||
FROM: | Larry Shonkwiler | |
SUBJECT: | New Hampton, Iowa Corn Origination Potential/Basis Impact & DDG Price Forecast |
Executive Summary
The purpose of this analysis is to assist Hometown Energy LLC, an Iowa ethanol group, in evaluating the market potential for a proposed ethanol plant of either 50 or 100 million gallons per year near New Hampton, Iowa. The study found the following:
• | Within a 30-mile radius, there are 2 plants currently in operation which will have an impact on the proposed plant’s origination but are physically outside the arbitrary 30 mile radius. No plants are currently under construction but there are two plants in the proposal stage. Estimated annual ethanol corn demand from other plants at this level is 107 million bushels; | ||
• | A radius of 30 to 50 miles includes 7 plants which are currently in operation. However, the computed travel distance between each of these and the New Hampton location ranges from a minimum of 71 miles (Iowa Ethanol LLC at Hanlontown) to a high of 96 miles. Two plants are under construction. There are no known proposed plants in this radius level at this time. Ethanol plants within this area are expected to consume approximately 207 million bushels of corn annually; | ||
• | Within 50-100 miles, 16 plants are in operating with a total production capacity of 641 million gallons per year. Six more plants are under construction and these facilities have an estimated capacity of 365 million gallons. Three plants with a capacity of 260 million gallons are in the proposal stage. Total corn demand would therefore be approximately 400-410 million bushels annually at the 50-100 mile radius level; | ||
• | Based on the expected configuration of existing/planned ethanol facilities, New Hampton’s origination area is likely to be heavily oriented to the northeast, east and southeast. At an average distance of 44 miles (See Table 4), the facility is expected to have access for approximately 66.7 million bushels of corn; | ||
• | Discussions with knowledgeable merchandising personnel indicate a draw area approaching 75 miles is not considered unusual for Iowa and Minnesota. This is largely the result of a generally good highway system; limited rail availability and the uncompetitive nature of rail versus truck movement over this distance; | ||
• | Estimated corn production within the above area is approximately 435 million bushels and using average beginning stocks of 93 million results in a “typical” supply of 528 million bushels; | ||
• | Annual feed use for the area is estimated at 113 million and existing/planned ethanol demand is expected to consume another 147 million bushels, leaving an implied exportable surplus (or quantity available for additional local ethanol use) of approximately 175 million bushels; | ||
• | The current estimated stocks-to-use ratio for the area is 21.5%. A 50 mgpy plant would lower this ratio to 16.5% and add an estimated 4.9 cents to local basis values. A 100 mgpy plant would reduce the stocks-to-use ratio to 12.0% and add another 21/4 cents to |
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area basis values. Average producer prices would therefore, increase from a 10-year average of $2.27 per bushel, to $2.32 in the former case and to $2.34 in the latter; | |||
• | However, should U.S. yield technology continue at the rate realized during the past 25 years, increases in corn yields may offset the area’s higher demand requirements; | ||
• | The price of Distillers Dried Grains (DDGS) was analyzed during the past 15 years and found to be more closely correlated with corn rather than soybean meal prices. However, the latter may serve to set establish the upper and lower bounds of DDG prices. Using USDA baseline projections for corn and soybean meal prices through the 2014/15 crop year, the assumption of increased ethanol production at a fairly conservative 25 million gallons per year was estimated to keep DDG prices in a range of $71.50 and $82.23 per ton. |
Introduction
This study has been prepared at the request of Mr. Steve Dietz of Hometown Energy LLC. Hometown is a start-up ethanol company which is considering locating a plant in northeastern Iowa. The tentative site identified for this study is situated near the town of New Hampton, in Chickasaw County. Objectives of the study are several-fold:
• | Identify corn production in areas potentially tributary to the plant; | ||
• | Determine feed demand by county, using standard consumption rates according to class of livestock or poultry; | ||
• | Account for current and/or planned corn requirements from competing ethanol facilities; | ||
• | Compute the net corn balance available to the plant assuming origination radiuses of 30, 50 and 100 miles; | ||
• | Identify the likely flow of corn to the plant in view of existing and planned facilities; | ||
• | Estimate the impact of additional ethanol demand on local corn prices and basis levels; | ||
• | Estimate the impact of higher ethanol production on the price of distillers dried grains (DDGs). |
Tables 1 through 3 provide a summary of (1) current operating ethanol plants (identified by red dots in the map which follows); (2) plants under construction (identified by blue dots); and (3) proposed ethanol plants (green), as of early December 2005. Within a 30-mile radius, there are 2 plants currently in operation which will have an impact on the proposed plant’s origination but are physically outside the arbitrary 30 mile radius. These include a 100 million gallon per year plant some 50 miles to the west at Mason City, Iowa and a 40 million gallon per year plant approximately 59 miles north/north-east of New Hampton at Preston, Minnesota,
No plants are currently under construction but there are two plants in the proposal stage. These include a 100 million gallon per year Verasun plant 19 miles to the west at Charles City and a 50 million gallon per year plant some 52 miles to the west in Mitchell County near St. Ansgar.
Table 1: Ethanol Plants—30 Mile Radius of New Hampton
Company | City | County | State | MGPY | Distance | 1/2 WAY | ||||||
Operating-Red | ||||||||||||
Golden Grain Energy, LLC | Mason City | Cerro Gordo | IA | 100 | 50 | 25 | ||||||
Pro-Corn LLC | Preston | Fillmore | MN | 40 | 59 | 30 | ||||||
Under Construction-Blue | ||||||||||||
Proposed-Green | ||||||||||||
Verasun | Charles City | Floyd | IA | 100 | 19 | 10 | ||||||
Absolute Energy | St. Ansgar | Mitchell | IA | 50 | 52 | 26 | ||||||
Grand Total | 290 | |||||||||||
Corn (2.7) | 107 |
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Total annual capacity of the 4 plants impacting the 30-mile origination area is 290 million gallons. Estimated annual corn demand is therefore 107 million bushels, using a 2.7:1 conversion ratio.
Expanding the origination area from 30 to 50 miles brings an additional 7 plants which are currently in operation. However, the computed travel distance between each of these and the New Hampton location is a minimum of 71 miles (Iowa Ethanol LLC at Hanlontown) up to 96 miles (ADM, Cedar Rapids; EXOL, Inc. at Albert Lea, Minnesota. Two plants are known to be under construction. These include Hawkeye Renewables’ 100 mgpy plant at Fairbanks, which is located 45 miles to the south/southeast in Buchanan County and a 50 million plant some 109 miles to the southwest at Goldfield, Iowa in Wright County. There are no known proposed plants in this radius level at this time. Total ethanol production capacity is 560 million gallons per year, equivalent to 207 million bushels of corn.
Table 2: Ethanol Plants—50 Mile Radius of New Hampton
Company | City | County | State | MGPY | Distance | 1/2 WAY | ||||||
Operating-Red | ||||||||||||
Iowa Ethanol, LLC | Hanlontown | Worth | IA | 55 | 71 | 36 | ||||||
Corn Plus | Winnebago | Faribault | MN | 44 | 81 | 41 | ||||||
Pine Lake Ethanol | SteamboatRock | Hardin | IA | 20 | 84 | 42 | ||||||
Hawkeye Renewables | Iowa Falls | Hardin | IA | 45 | 89 | 45 | ||||||
Xethanol Biofuels, LLC | Blairstown | Benton | IA | 6 | 95 | 48 | ||||||
ADM (4) | Cedar Rapids | Linn | IA | 200 | 96 | 48 | ||||||
EXOL, INC. | Albert Lea | Freeborn | MN | 40 | 96 | 48 | ||||||
Under Construction-Blue | ||||||||||||
Hawkeye Renewables | Fairbanks | Buchanan | IA | 100 | 45 | 23 | ||||||
CORN | Goldfield | Wright | IA | 50 | 109 | 55 | ||||||
Proposed-Green | ||||||||||||
Grand Total | 560 | |||||||||||
Corn (2.7) | 207 |
Within 50-100 miles, 16 plants are in operating with a total production capacity of 641 million gallons per year. Six more plants are under construction and these facilities have an estimated capacity of 365 million gallons. Three plants with a capacity of 260 million gallons are in the proposal stage. Total capacity at the 50-100 mile radius level is 1.1 billion gallons, or the equivalent of approximately 409 million bushels of corn demand annually.
Table 3: Ethanol Plants—100 Mile Radius of New Hampton
Company | City | County | State | MGPY | Distance | 1/2 WAY | ||||||
Operating-Red | ||||||||||||
City | County | State | MGPY | Distance | 1/2 WAY | |||||||
Al-Corn Clean Fuel | Claremont | Dodge | MN | 36 | 102 | 51 | ||||||
Permeate Refining | Hopkinton | Delaware | IA | 2 | 106 | 53 | ||||||
Midwest Grain Processors | Lakota | Kossuth | IA | 100 | 120 | 60 | ||||||
Voyager Ethanol | Emmetsburg | Palo Alto | IA | 50 | 129 | 65 | ||||||
Verasun (2) | Fort Dodge | Webster | IA | 110 | 142 | 71 | ||||||
Cargill, INC (2) | Eddyville | Mahaska | IA | 35 | 150 | 75 | ||||||
NorthStar Ethanol, LLC | Lake Crystal | Blue Earth | MN | 50 | 172 | 86 | ||||||
Otter Creek Ethanol, LLC | Ashton | Osceola | IA | 55 | 198 | 99 | ||||||
Ethanol2000 | Bingham Lake | Cottonwood | MN | 30 | 206 | 103 | ||||||
Quad-County Corn s | Galva | Ida | IA | 25 | 207 | 104 | ||||||
Tall Corn Ethanol LLC | Coon Rapids | Carroll | IA | 49 | 209 | 105 | ||||||
Minnesota Energy | Buffalo Lake | Renville | MN | 18 | 244 | 122 | ||||||
Heartland Corn Products | Winthrop | Sibley | MN | 36 | 245 | 123 | ||||||
Agri-Energy, LLC | Luverne | Rock | MN | 21 | 246 | 123 | ||||||
Land O Lakes | Melrose | Stearns | MN | 3 | 287 | 144 | ||||||
Central Minnesota Ethanol | Little Falls | Morrison | MN | 21 | 288 | 144 |
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Company | City | County | State | MGPY | Distance | 1/2 WAY | ||||||
Under Construction-Blue | ||||||||||||
Horizon Ethanol | Jewell | Hamilton | IA | 60 | 119 | 60 | ||||||
Lincolnway Ethanol | Nevada | Story | IA | 50 | 144 | 72 | ||||||
Frontier Ethanol, LLC | Gowrie | Webster | IA | 60 | 153 | 77 | ||||||
U.S. Bio Albert City | Albert City | Pocahontas | IA | 100 | 165 | 83 | ||||||
Heron Lake BioEnergy, LLC | Heron Lake | MN | 50 | 212 | 106 | |||||||
Bushmills | Atwater | Kandiyohi | MN | 45 | 266 | 133 | ||||||
Proposed-Green | ||||||||||||
US Bio Energy | Janesville | Waseca | MN | 100 | 151 | 76 | ||||||
Biofuel Solutions | Fairmont | Martin | MN | 110 | 157 | 79 | ||||||
Broin | Corning | Webster | IA | 50 | 268 | 134 | ||||||
Grand Total | 1,105 | |||||||||||
Corn (2.7) | 409 |
Map I immediately below presents a summary of the plants listed above, in the context of 30, 50 and 100 mile radiuses from the proposed site at New Hampton. As the map suggests, the plants are heavily concentrated to the northwest, west and southwest of New Hampton while the area between New Hampton and say, the Mississippi River affords virtually no competition from other ethanol plants.
Map I: 30, 50 & 100 Mile Corn Origination Radius
Note: | Red: | Operating; | ||
Blue: | Under Construction; | |||
Green: | Proposed Plants. |
Table 4 attempts to expand the discussion regarding the above origination potential. Shown below are the following:
• | Column (1) identifies the county; | ||
• | Columns (2) through (4) present each county’s balance (after local feed and ethanol corn demand is deducted) at the 30, 50 and 100 mile distances from the plant; | ||
• | Column 5 shows the approximate distance of the county from the New Hampton site, using a major centrally-located town as a reference point; | ||
• | Based on the above map, location of competing facilities and the proximity of other markets (Mississippi River barge market, for example), the 50-mile radius appears to be most representative of the distance from which the proposed plant can expect to draw |
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corn. Column 6 provides an estimate of each county’s available corn surplus at the 50-mile level. For example, Chickasaw county is estimated to have a net surplus of 12.969 million bushels. Floyd county, on the other hand, has a proposed 100 mbpy plant 19 miles away at Charles City which effectively leaves that county deficit 22.1 million bushels. The cumulative balance for these two counties is therefore, (9.1) million bushels. Inclusion of other counties such as Howard, Bremer, Winneshiek, Mitchell, Fayette and Black Hawk brings the cumulative corn balance to 53.9 million bushels, at a distance of 44 miles. |
• | Column 7 indicates whether or not there is an ethanol plant (operating, under construction or proposed) for each county listed. | ||
• | Column 8 shows the estimated corn balance for each county the New Hampton plant is expected to potentially draw from. Note Floyd, Mitchell and Black Hawk are all excluded due to the proximity of other plants. | ||
• | Column 9 gives the cumulative balance for New Hampton’s likely corn origination area. At a distance of 44 miles (column 4), the facility is expected to have access for approximately 66.7 million bushels of corn, competing almost exclusively with the river export market. |
Table 4: New Hampton Likely Corn Origination Area
(1) | (2) | (3) | (4) | (5) | (6) | (7) | (8) | (9) | ||||||||||
Draw | Approx | 50 | County | Cumulative | ||||||||||||||
County | 30 | 50 | 100 | Miles | Cumulative | Plant | Balance | Balance | ||||||||||
Chickasaw | 12,969 | 12,969 | 12,969 | 0 | 12,969 | 50/100 P | 12,969 | 12,969 | ||||||||||
Floyd | (25,096) | (22,110) | (22,110) | 19 | (9,141) | 100 P | 12,969 | |||||||||||
Howard | 9,966 | 11,073 | 11,073 | 28 | 1,932 | No | 11,073 | 24,042 | ||||||||||
Bremer | 13,576 | 13,576 | 13,576 | 32 | 15,508 | No | 13,576 | 37,618 | ||||||||||
Winneshiek | 4,429 | 11,071 | 11,071 | 38 | 26,579 | No | 11,071 | 48,689 | ||||||||||
Mitchell | (14,197) | (6,171) | (6,171) | 41 | 20,408 | 50 P | 48,689 | |||||||||||
Fayette | 9,024 | 18,049 | 18,049 | 42 | 38,456 | No | 18,049 | 66,738 | ||||||||||
Black Hawk | 15,436 | 17,151 | 44 | 53,893 | No | 66,738 | ||||||||||||
Allamakee | 1,913 | 3,826 | 54 | 55,805 | No | 1,913 | 68,651 | |||||||||||
Clayton | 4,652 | 11,631 | 57 | 60,458 | No | 4,652 | 73,303 |
Map II: Eastern Origination Potential Should Benefit New Hampton Plant
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Corn Production by County
As a part of this study, corn origination areas based on 30, 50 and 100 miles were developed and the counties lying within those distances were identified. Average corn production for the the 95-99 and 2000-04 crop years was computed along with the corresponding change. This information is provided in Tables 5 and 6 below for Iowa, Minnesota and Wisconsin. In the case of the latter, only a limited amount of corn was expected to move across the Mississippi River to the plant. As a result, only production for the latter period is shown. Counties highlighted are taken from the above discussion and it should be noted that they have typically seen more modest production gains between the two periods covered than those counties located further west.
Table 5: Iowa County Corn Production (000 bu)
95-99 | 00-04 | 95-99 | 00-04 | |||||||||||||||||||||||||
County | Average | Average | Change | County | Average | Average | Change | |||||||||||||||||||||
Chickasaw | 17,318,600 | 18,022,800 | 704,200 | Linn | 19,147,600 | 21,838,000 | 2,690,400 | |||||||||||||||||||||
Floyd | 19,489,800 | 19,679,000 | 189,200 | Marshall | 19,763,600 | 23,039,200 | 3,275,600 | |||||||||||||||||||||
Howard | 15,744,800 | 15,522,400 | -222,400 | Dubuque | 17,115,600 | 17,734,200 | 618,600 | |||||||||||||||||||||
Bremer | 16,687,400 | 17,627,600 | 940,200 | Poweshiek | 15,393,800 | 19,551,600 | 4,157,800 | |||||||||||||||||||||
Winneshiek | 18,322,400 | 18,111,000 | -211,400 | Wright | 24,225,000 | 27,510,000 | 3,285,000 | |||||||||||||||||||||
Mitchell | 19,230,200 | 19,867,200 | 637,000 | Hamilton | 24,941,800 | 27,490,400 | 2,548,600 | |||||||||||||||||||||
Fayette | 26,066,000 | 26,074,600 | 8,600 | Kossuth | 42,548,000 | 47,220,200 | 4,672,200 | |||||||||||||||||||||
Black Hawk | 20,055,600 | 21,239,600 | 1,184,000 | Johnson | 13,296,000 | 16,167,800 | 2,871,800 | |||||||||||||||||||||
Allamakee | 9,546,800 | 9,340,400 | -206,400 | Jones | 20,449,200 | 21,261,600 | 812,400 | |||||||||||||||||||||
Clayton | 20,374,600 | 20,094,000 | -280,600 | Humboldt | 18,353,600 | 20,480,800 | 2,127,200 | |||||||||||||||||||||
Cerro Gordo | 21,426,400 | 24,599,200 | 3,172,800 | Jasper | 22,778,200 | 26,046,200 | 3,268,000 | |||||||||||||||||||||
Buchanan | 22,418,200 | 24,675,600 | 2,257,400 | Hancock | 23,774,800 | 26,066,600 | 2,291,800 | |||||||||||||||||||||
Benton | 24,787,000 | 28,437,400 | 3,650,400 | Cedar | 21,495,200 | 24,233,200 | 2,738,000 | |||||||||||||||||||||
Grundy | 21,674,800 | 25,142,200 | 3,467,400 | Iowa | 14,917,400 | 17,609,200 | 2,691,800 | |||||||||||||||||||||
Franklin | 24,047,000 | 26,839,200 | 2,792,200 | Webster | 27,438,200 | 31,197,400 | 3,759,200 | |||||||||||||||||||||
Tama | 21,644,000 | 24,983,200 | 3,339,200 | Story | 23,108,800 | 25,343,200 | 2,234,400 | |||||||||||||||||||||
Worth | 15,528,400 | 16,299,200 | 770,800 | Jackson | 12,576,200 | 13,294,000 | 717,800 | |||||||||||||||||||||
Winnebago | 17,888,800 | 18,576,200 | 687,400 | Polk | 13,813,600 | 14,291,200 | 477,600 | |||||||||||||||||||||
Hardin | 23,535,000 | 26,610,400 | 3,075,400 | Boone | 21,444,000 | 23,077,400 | 1,633,400 | |||||||||||||||||||||
Delaware | 24,627,800 | 25,701,800 | 1,074,000 | Butler | 20,686,200 | 22,700,400 | 2,014,200 |
Table 6: Minnesota & Wisconsin County Corn Production (000 bu)
Minnesota | 95-99 | 00-04 | Wisconsin | 95-99 | 00-04 | |||||||||||||||||||||||
County | Average | Average | Change | County | Average | Average | Change | |||||||||||||||||||||
Faribault | 29,291,620 | 31,084,660 | 1,793,040 | Buffalo | 6,718,600 | |||||||||||||||||||||||
Freeborn | 25,372,740 | 27,523,480 | 2,150,740 | La Crosse | 3,702,600 | |||||||||||||||||||||||
Rice | 11,550,780 | 11,692,600 | 141,820 | Trempealeau | 8,004,000 | |||||||||||||||||||||||
Steele | 15,035,600 | 15,524,780 | 489,180 | Crawford | 3,326,600 | |||||||||||||||||||||||
Dodge | 15,082,900 | 16,337,620 | 1,254,720 | Vernon | 5,566,200 | |||||||||||||||||||||||
Fillmore | 20,552,540 | 21,918,180 | 1,365,640 | Monroe | 5,244,600 | |||||||||||||||||||||||
Goodhue | 18,464,160 | 19,987,400 | 1,523,240 | Richland | 3,315,600 | |||||||||||||||||||||||
Houston | 8,768,960 | 7,281,380 | -1,487,580 | Iowa | 6,825,000 | |||||||||||||||||||||||
Mower | 25,285,780 | 26,321,160 | 1,035,380 | Grant | 18,871,400 | |||||||||||||||||||||||
Olmsted | 14,708,240 | 15,876,700 | 1,168,460 | |||||||||||||||||||||||||
Wabasha | 10,790,180 | 11,790,540 | 1,000,360 | |||||||||||||||||||||||||
Winona | 10,736,140 | 10,649,020 | -87,120 | |||||||||||||||||||||||||
Waseca | 17,012,080 | 18,046,800 | 1,034,720 |
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Tables 7, 8 and 9 present summary data on livestock and poultry numbers as well as a corn balance for each county once local feed demand is accounted for. The following consumption rates were utilized and all livestock data was taken from the 1997 and 2002 Agricultural Census, which reports county level numbers.
All Cattle: | 50 bushels per unit of inventory; | |
All Hogs: | 9 bushels per unit sold; | |
Broilers: | .1116 bushels per unit sold; and | |
Turkeys: | .4286 bushels per unit sold. |
Animal numbers were then multiplied by the above factors and subtracted from the 1999-2004 average corn production figure developed for each county. The resulting “balance” is shown for each in the tables below.
Table 7: Iowa County Livestock Numbers
Cattle | Cattle | Hogs Sold | Hogs Sold | Broilers | Broilers | 2002 | ||||||||||||||||||||||
1997 | 2002 | 1997 | 2002 | 1997 | 2002 | Balance | ||||||||||||||||||||||
Chickasaw | 40,140 | 34,810 | 279,797 | 368,129 | (D | ) | 864 | 12,969 | ||||||||||||||||||||
Floyd | 16,798 | 17,099 | 241,443 | 432,514 | (D | ) | 41,911 | 14,927 | ||||||||||||||||||||
Howard | 30,882 | 31,766 | 176,495 | 317,073 | 325 | 63,523 | 11,073 | |||||||||||||||||||||
Bremer | 25,689 | 21,479 | 204,599 | 330,867 | 1,541 | 2,000 | 13,576 | |||||||||||||||||||||
Winneshiek | 81,671 | 81,808 | 241,844 | 324,531 | 475 | 255,750 | 11,071 | |||||||||||||||||||||
Mitchell | 45,239 | 44,408 | 489,735 | 587,440 | (D | ) | 112,854 | 12,347 | ||||||||||||||||||||
Fayette | 59,109 | 54,698 | 505,751 | 587,887 | 315 | 815 | 18,049 | |||||||||||||||||||||
Black Hawk | 17,019 | 14,833 | 296,862 | 371,830 | 2,651 | 1,445 | 17,151 | |||||||||||||||||||||
Allamakee | 69,656 | 68,920 | 143,677 | 229,844 | 0 | 0 | 3,826 | |||||||||||||||||||||
Clayton | 84,114 | 81,839 | 433,048 | 484,848 | 3,050 | 68,809 | 11,631 | |||||||||||||||||||||
Cerro Gordo | 9,380 | 10,975 | 285,987 | 322,247 | (D | ) | 926 | 21,150 | ||||||||||||||||||||
Buchanan | 28,606 | 21,600 | 397,000 | 552,193 | 118,225 | 617,665 | 18,557 | |||||||||||||||||||||
Benton | 40,919 | 36,452 | 199,200 | 213,656 | 8,203 | 7,365 | 24,691 | |||||||||||||||||||||
Grundy | 20,361 | 16,461 | 277,678 | 374,104 | 2,715 | 1,275 | 20,952 | |||||||||||||||||||||
Franklin | 19,546 | 16,629 | 341,135 | 768,852 | 1,437 | 265 | 19,088 | |||||||||||||||||||||
Tama | 34,519 | 34,522 | 202,368 | 194,837 | 1,104 | 475 | 21,504 | |||||||||||||||||||||
Worth | 9,908 | 7,706 | 80,664 | 97,119 | 930 | 189 | 15,040 | |||||||||||||||||||||
Winnebago | 6,099 | 6,473 | 103,133 | 271,393 | (D | ) | 789 | 15,810 | ||||||||||||||||||||
Hardin | 20,275 | 19,839 | 768,467 | 1,693,130 | 708 | 935 | 10,380 | |||||||||||||||||||||
Delaware | 70,147 | 75,243 | 635,500 | 657,774 | 265 | 201 | 16,020 |
Table 7: Iowa County Livestock Numbers (continued)
Cattle | Cattle | Hogs Sold | Hogs Sold | Broilers | Broilers | 2002 | ||||||||||||||||||||||
1997 | 2002 | 1997 | 2002 | 1997 | 2002 | Balance | ||||||||||||||||||||||
Linn | 37,589 | 33,007 | 132,215 | 144,113 | 1,858 | 2,462 | 18,890 | |||||||||||||||||||||
Marshall | 26,362 | 19,576 | 221,852 | 412,195 | 1,645 | 500 | 18,351 | |||||||||||||||||||||
Dubuque | 112,834 | 103,537 | 420,302 | 344,235 | 687 | 385 | 9,459 | |||||||||||||||||||||
Poweshiek | 40,175 | 40,015 | 225,372 | 89,121 | 105 | 417 | 16,749 | |||||||||||||||||||||
Wright | 5,349 | 4,855 | 486,380 | 934,964 | (D | ) | 415 | 18,853 | ||||||||||||||||||||
Hamilton | 5,211 | 5,593 | 888,179 | 1,270,158 | (D | ) | 0 | 15,779 | ||||||||||||||||||||
Kossuth | 30,385 | 31,462 | 653,397 | 991,508 | 8,142 | 310 | 36,723 | |||||||||||||||||||||
Johnson | 38,579 | 34,437 | 228,384 | 253,619 | 10,537 | 31,322 | 12,160 | |||||||||||||||||||||
Jones | 62,399 | 57,416 | 286,727 | 239,410 | 1,176 | 7,700 | 16,235 | |||||||||||||||||||||
Humboldt | 12,754 | 11,677 | 182,196 | 393,986 | 0 | 1,415 | 16,351 | |||||||||||||||||||||
Jasper | 46,318 | 39,276 | 433,896 | 491,699 | 3,031 | 3,266 | 19,657 | |||||||||||||||||||||
Hancock | 11,784 | 9,669 | 321,287 | 592,582 | (D | ) | 1,050 | 20,250 | ||||||||||||||||||||
Cedar | 30,252 | 22,194 | 283,284 | 351,223 | 1,011 | 761 | 19,962 | |||||||||||||||||||||
Iowa | 44,875 | 44,095 | 225,298 | 265,707 | 485 | 2,580 | 13,013 | |||||||||||||||||||||
Webster | 13,034 | 7,423 | 268,209 | 524,828 | (D | ) | 0 | 26,103 | ||||||||||||||||||||
Story | 17,898 | 16,040 | 182,595 | 155,492 | 4,300 | 3,893 | 23,141 | |||||||||||||||||||||
Jackson | 91,157 | 92,027 | 159,963 | 148,421 | 2,150 | 0 | 7,357 | |||||||||||||||||||||
Polk | 9,678 | 10,836 | 43,803 | 49,805 | 6,605 | 1,834 | 13,301 | |||||||||||||||||||||
Boone | 17,178 | 17,309 | 199,402 | 126,090 | 1,653 | 720 | 21,077 | |||||||||||||||||||||
Butler | 21,995 | 19,103 | 319,589 | 511,508 | 9,773 | 1,044 | 17,142 |
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Table 8: Minnesota County Livestock & Poultry Numbers
Hogs | Hogs | Broilers | Broilers | Turkeys | Turkeys | |||||||||||||||||||||||||||||||
Cattle | Cattle | Sold | Sold | Sold | Sold | Sold | Sold | Balance | ||||||||||||||||||||||||||||
1997 | 2002 | 1997 | 2002 | 1997 | 2002 | 1997 | 2002 | 2002 | ||||||||||||||||||||||||||||
Faribault | 13,987 | 12,684 | 402,861 | 609,939 | (D | ) | 750 | 0 | 31 | 24,961 | ||||||||||||||||||||||||||
Freeborn | 14,327 | 15,362 | 444,770 | 672,221 | 3,903 | 3500 | (D | ) | 34,054 | 20,690 | ||||||||||||||||||||||||||
Rice | 28,843 | 25,764 | 411,856 | 312,814 | 3,615 | 3,855 | (D | ) | 0 | 7,589 | ||||||||||||||||||||||||||
Steele | 18,029 | 19,544 | 154,888 | 303,994 | 1,201 | 2,683 | 355,792 | 291,906 | 11,686 | |||||||||||||||||||||||||||
Dodge | 22,797 | 22,000 | 207,899 | 407,197 | 149 | 1,630 | (D | ) | 302,104 | 11,443 | ||||||||||||||||||||||||||
Fillmore | 72,870 | 72,249 | 252,874 | 253,474 | 3,058 | 1,279 | 154,752 | (D | ) | 16,024 | ||||||||||||||||||||||||||
Goodhue | 76,158 | 64,230 | 222,929 | 317,610 | 1,209 | 3,119 | (D | ) | 54,832 | 13,894 | ||||||||||||||||||||||||||
Houston | 51,241 | 53,631 | 71,353 | 87,472 | 145 | 507 | (D | ) | 0 | 3,813 | ||||||||||||||||||||||||||
Mower | 23,586 | 24,697 | 323,039 | 590,327 | 613 | 653 | 21 | 0 | 19,773 | |||||||||||||||||||||||||||
Olmsted | 48,796 | 48,204 | 81,656 | 125,814 | 1,683 | 576 | (D | ) | 0 | 12,334 | ||||||||||||||||||||||||||
Wabasha | 64,406 | 58,627 | 54,748 | 79,084 | (D | ) | 44,801 | 58 | 63 | 8,142 | ||||||||||||||||||||||||||
Winona | 83,340 | 80,824 | 93,543 | 115,189 | 999 | 1,182 | (D | ) | 0 | 5,571 | ||||||||||||||||||||||||||
Waseca | 13,636 | 12,329 | 298,946 | 580,927 | 0 | 590 | 0 | 0 | 12,202 |
(D): | Not disclosed. |
Table 9: Wisconsin County Livestock & Poultry Numbers
Hogs | Hogs | Broilers | Broilers | Turkeys | Turkeys | |||||||||||||||||||||||||||||||
Cattle | Cattle | Sold | Sold | Sold | Sold | Sold | Sold | Balance | ||||||||||||||||||||||||||||
1997 | 2002 | 1997 | 2002 | 1997 | 2002 | 1997 | 2002 | 2002 | ||||||||||||||||||||||||||||
Buffalo | 66,872 | 63,562 | 16,605 | 9,832 | 8,899,830 | 12,187,100 | 125,060 | 184,090 | 2,013 | |||||||||||||||||||||||||||
La Crosse | 36,769 | 31,550 | 47,000 | 42,934 | 476 | 126,470 | 57 | 44 | 1,725 | |||||||||||||||||||||||||||
Trempealeau | 70,541 | 62,976 | 18,419 | 13,454 | 17,291,567 | 19,126,486 | (D | ) | 0 | 2,600 | ||||||||||||||||||||||||||
Crawford | 42,075 | 38,152 | 17,314 | 21,564 | 1,305 | 991 | 16 | 67 | 1,225 | |||||||||||||||||||||||||||
Vernon | 84,850 | 74,605 | 16,476 | 4,165 | 26,726 | 25,096 | 78 | 322 | 1,796 | |||||||||||||||||||||||||||
Monroe | 73,175 | 72,375 | 6,258 | 3,605 | 60,419 | 74,180 | (D | ) | 125 | 1,585 | ||||||||||||||||||||||||||
Richland | 51,757 | 44,982 | 51,010 | 49,645 | 0 | 1,371 | 178 | 127 | 619 | |||||||||||||||||||||||||||
Iowa | 94,056 | 82,043 | 53,562 | 42,396 | 5,933 | 4500 | 20 | 26 | 2,341 | |||||||||||||||||||||||||||
Grant | 173,988 | 163,392 | (D | ) | 25 | 10,702 |
(D): | Not disclosed. |
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In Table 10 and 11, we provide detail on each county’s (column 1) corn balance after local feed needs are met (column 2). Column (3) indicates the capacity of any ethanol plants operating or scheduled for development. Columns 4 through 5 give the net balance after local feed needs and ethanol demand is satisfied at the 30, 50 and 100 mile radius levels. Finally, column 7 indicates the approximate driving distance from a centrally-located town in each country from the New Hampton site. The high-lighted counties in columns 6 and 7 are those which are most likely to provide corn to the plant. Note that at the 50-mile radius (column 5), Iowa counties Chickasaw through Clayton have an excess of approximately 77.6 million bushels. The same approach at the 100-mile radius indicates counties Chickasaw through Tama have a net balance of approximately 138 million bushels, extending up to a distance of about 75 miles from the plant.
Table 10: Iowa County Corn Balance: 30, 50 & 100 Mile Radius
(1) | (2) | (3) | (4) | (5) | (6) | (7) | ||||||||||||||||||
Ethanol | Net Balance | County | ||||||||||||||||||||||
County | Balance | Plant (mgpy) | 30 | 50 | 100 | Distance | ||||||||||||||||||
Chickasaw | 12,969 | 12,969 | 12,969 | 12,969 | 0 | |||||||||||||||||||
Floyd | 14,927 | 100 | (25,096 | ) | (22,110 | ) | (22,110 | ) | 19 | |||||||||||||||
Howard | 11,073 | 9,966 | 11,073 | 11,073 | 28 | |||||||||||||||||||
Bremer | 13,576 | 13,576 | 13,576 | 13,576 | 32 | |||||||||||||||||||
Winneshiek | 11,071 | 4,429 | 11,071 | 11,071 | 38 | |||||||||||||||||||
Mitchell | 12,347 | 50 | (14,197 | ) | (6,171 | ) | (6,171 | ) | 41 | |||||||||||||||
Fayette | 18,049 | 9,024 | 18,049 | 18,049 | 42 | |||||||||||||||||||
Black Hawk | 17,151 | 0 | 15,436 | 17,151 | 44 | |||||||||||||||||||
Butler | 17,142 | 4,285 | 17,142 | 17,142 | 51 | |||||||||||||||||||
Allamakee | 3,826 | 1,913 | 3,826 | 54 | ||||||||||||||||||||
Clayton | 11,631 | 4,652 | 11,631 | 57 | ||||||||||||||||||||
Cerro Gordo | 21,150 | 100 | (15,887 | ) | 61 | |||||||||||||||||||
Buchanan | 18,557 | 100 | (18,480 | ) | 68 | |||||||||||||||||||
Benton | 24,691 | 6 | 22,469 | 70 | ||||||||||||||||||||
Grundy | 20,952 | 20,952 | 71 | |||||||||||||||||||||
Franklin | 19,088 | 19,088 | 72 | |||||||||||||||||||||
Tama | 21,504 | 21,504 | 75 | |||||||||||||||||||||
Worth | 15,040 | 55 | (5,331 | ) | 80 | |||||||||||||||||||
Winnebago | 15,810 | 15,810 | 89 | |||||||||||||||||||||
Hardin | 10,380 | 65 | (13,694 | ) | 89 |
(1) | (2) | (3) | (4) | (5) | (6) | (7) | ||||||||||||||||||
Ethanol | Net Balance | County | ||||||||||||||||||||||
County | Balance | Plant (mgpy) | 30 | 50 | 100 | Distance | ||||||||||||||||||
Delaware | 16,020 | 2 | 15,279 | 90 | ||||||||||||||||||||
Linn | 18,890 | 200 | (55,184 | ) | 96 | |||||||||||||||||||
Marshall | 18,351 | 18,351 | 104 | |||||||||||||||||||||
Dubuque | 9,459 | 9,459 | 108 | |||||||||||||||||||||
Poweshiek | 16,749 | 13,399 | 108 | |||||||||||||||||||||
Wright | 18,853 | 50 | 334 | 113 | ||||||||||||||||||||
Hamilton | 15,779 | 60 | (6,443 | ) | 117 | |||||||||||||||||||
Kossuth | 36,723 | 100 | (15,003 | ) | 120 | |||||||||||||||||||
Johnson | 12,160 | 4,864 | 120 | |||||||||||||||||||||
Jones | 16,235 | 14,612 | 122 | |||||||||||||||||||||
Humboldt | 16,351 | 9,811 | 123 | |||||||||||||||||||||
Jasper | 19,657 | 7,863 | 127 | |||||||||||||||||||||
Hancock | 20,250 | 20,250 | 129 | |||||||||||||||||||||
Cedar | 19,962 | 2,994 | 136 | |||||||||||||||||||||
Iowa | 13,013 | 9,109 | 137 | |||||||||||||||||||||
Webster | 26,103 | 220 | (71,040 | ) | 142 | |||||||||||||||||||
Story | 23,141 | 50 | (5 | ) | 144 | |||||||||||||||||||
Jackson | 7,357 | 1,839 | 149 | |||||||||||||||||||||
Polk | 13,301 | 13,301 | 157 | |||||||||||||||||||||
Boone | 21,077 | 3,162 | 160 | |||||||||||||||||||||
Total | 14,956 | 77,599 | 131,587 | |||||||||||||||||||||
14,956 | 77,599 | 137,851 |
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Table 11: Minnesota and Wisconsin County Corn Balance: 30, 50 and 100-mile Radius
(1) | (2) | (3) | (4) | (5) | (6) | (7) | ||||||||||||||||||
Ethanol | Net Balance | County | ||||||||||||||||||||||
County | Balance | Plant (mgpy) | 30 | 50 | 100 | Distance | ||||||||||||||||||
Minnesota | ||||||||||||||||||||||||
Fillmore | 16,024 | 40 | 0 | 0 | 1,210 | 59 | ||||||||||||||||||
Mower | 19,773 | 0 | 0 | 19,773 | 61 | |||||||||||||||||||
Olmsted | 12,334 | 0 | 0 | 12,334 | 74 | |||||||||||||||||||
Houston | 3,813 | 0 | 0 | 3,813 | 77 | |||||||||||||||||||
Dodge | 11,443 | 36 | 0 | 0 | -1,890 | 89 | ||||||||||||||||||
Freeborn | 20,690 | 40 | 0 | 0 | 5,876 | 100 | ||||||||||||||||||
Wabasha | 8,142 | 0 | 0 | 8,142 | 101 | |||||||||||||||||||
Winona | 5,571 | 0 | 0 | 5,571 | 101 | |||||||||||||||||||
Goodhue | 13,894 | 0 | 0 | 13,894 | 106 | |||||||||||||||||||
Faribault | 24,961 | 44 | 0 | 0 | 8,665 | 125 | ||||||||||||||||||
Steele | 11,686 | 0 | 0 | 11,686 | 127 | |||||||||||||||||||
Waseca | 12,202 | 100 | 0 | 0 | -24,835 | 140 | ||||||||||||||||||
Rice | 7,589 | 0 | 0 | 7,589 | 142 | |||||||||||||||||||
Total | 33,317 | |||||||||||||||||||||||
Wisconsin | ||||||||||||||||||||||||
Crawford | 1,225 | 0 | 0 | 1,225 | 97 | |||||||||||||||||||
Grant | 10,702 | 0 | 0 | 10,702 | 99 | |||||||||||||||||||
Vernon | 1,796 | 0 | 0 | 1,796 | 122 | |||||||||||||||||||
Buffalo | 2,013 | 0 | 0 | 2,013 | 134 | |||||||||||||||||||
Richland | 619 | 0 | 0 | 619 | 134 | |||||||||||||||||||
Iowa | 2,341 | 0 | 0 | 2,341 | 134 | |||||||||||||||||||
La Crosse | 1,725 | 0 | 0 | 1,725 | 141 | |||||||||||||||||||
Trempealeau | 2,600 | 0 | 0 | 2,600 | 162 | |||||||||||||||||||
Total | 0 | |||||||||||||||||||||||
Summary | ||||||||||||||||||||||||
Iowa | 14,956 | 77,599 | 137,851 | |||||||||||||||||||||
Minnesota | 0 | 0 | 33,317 | |||||||||||||||||||||
Wisconsin | 0 | 0 | 0 | |||||||||||||||||||||
Total-All | 14,956 | 77,599 | 171,168 |
The tables indicate that once local feed and existing/planned ethanol demand is taken into account, the 30-mile radius leaves a balance of 15 million bushels, all of which is derived from area Iowa counties. At the 50-mile radius, approximately 78 million bushels of corn is available to the proposed site, all of which is again sourced from Iowa counties. At the 100-mile radius, an estimated 171 million bushels of corn is available, with 137.9 million derived from Iowa counties and the balance of 33.3 million sourced from Minnesota. No Wisconsin corn is assumed in the analysis.
Based on the above analysis and discussions with knowledgeable merchandising personnel, a draw or grain origination area approaching 75 miles is not considered unusual for the Iowa and Minnesota area. This is largely the result of a generally good highway system; limited rail availability and the uncompetitive nature of rail versus truck movement over this distance. Table 12 presents a summary of the region’s estimated corn balance. Some key points:
• | Combined production for Iowa and Minnesota counties included in the area is 435 million bushels. This is based on average production for the 1999-2004 period. Iowa counties account for 363 million, or 84% of the total. Minnesota counties produce an estimated 71 million, or 16% of the total; | ||
• | In recent years, carry-over stocks have averaged about 21.5% of production. Adding this relationship into the equation gives estimated beginning corn stocks for the region of 93.4 million bushels; | ||
• | Local corn supply is therefore, 528 million bushels; | ||
• | From the analysis completed above, annual feed use approximately 113 million bushels; | ||
• | Current, expanding and planned ethanol consumption is expected to consume 147 million bushels of corn within the current trade area; |
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• | Local feed/ethanol corn demand is therefore, 259 million bushels. | ||
• | With average ending stocks of 93 million bushels, the implied export total is approximately 175 million bushels; | ||
• | The “average” ending stocks to use ratio is currently estimated at 21.5%. |
In developing an estimate of the potential basis impact of additional ethanol demand from the proposed plant, historical Iowa processor (Cedar Rapids) corn bids for the 1990 through 2004 crop years were analyzed along with quarterly Iowa stock levels. From each stock report, an implied usage figure for the preceding quarter was computed. This allowed an estimation of quarterly corn disappearance for the September-October-November, December-January-February, March-April-May and June-July-August periods. From this it then possible to compute balance of the year consumption levels corresponding to the start of each of the above periods. For example, with September 1 stocks of 25 mbu and production of 100 mbu, available September 1 supply (stocks) are 125 million bushels. If use during the September –August period is 100 million bushels, then the September 1 “Stocks to Balance of the Year Use Ratio” is 125/100 = 1.25. Similar balance of the year analyses were completed for December 1, March 1 and June 1. The higher ratio, the more available supply exceeds demand (and therefore, a lower basis) while a lower ratio brings supply more in balance with demand (therefore, a higher ratio).
Historical Iowa stocks to (balance of the year) use ratios along with the average monthly October Cedar Rapids corn basis are shown below as well as results from the regression analysis. The findings indicate for the years shown, there is a 77% R-squared relationship between September 1 Iowa supply/use levels and Cedar Rapids basis values. For the years analyzed, the “average” September 1 stocks/use ratio was 1.26. During October, Cedar Rapids corn bids averaged -11.45 under the December corn option.
Sep | Oct | |||||||
Stx/Use | CR Basis | |||||||
91 | 1.22 | (11.40 | ) | |||||
93 | 1.21 | (10.57 | ) | |||||
94 | 1.34 | (13.81 | ) | |||||
96 | 1.18 | (5.47 | ) | |||||
97 | 1.26 | (8.87 | ) | |||||
98 | 1.37 | (19.52 | ) | |||||
00 | 1.38 | (15.50 | ) | |||||
01 | 1.29 | (15.26 | ) | |||||
02 | 1.20 | (7.00 | ) | |||||
03 | 1.16 | (6.09 | ) | |||||
04 | 1.32 | (12.43 | ) | |||||
Ave | 1.26 | -11.45 |
Regression Output: | ||||
Constant | 50.9795 | |||
Std Err of Y Est | 2.2052 | |||
R Squared | 0.7748 | |||
No. of Observations | 11 | |||
Degrees of Freedom | 9 | |||
X Coefficient(s) | (49.3518 | ) | ||
Std Err of Coef. | 8.8689 |
We then developed the following local “supply and demand” table, as outlined earlier and included the impact on regional use of either a 50 mgpy or 100 mpgy ethanol plant at New Hampton. Using a 2.7 conversion ratio, the former plant would consume approximately 18.5 million bushels of local supply and the larger plant, 37 million bushels. The smaller plant changes the local beginning stocks-to-use ratio from 1.215:1, to 1.1653:1 while the larger plant reduces the ratio still further, to 1.1195:1.
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Using the regression equation: constant + stx/use coefficient X stx/use = estimated basis one gets the following:
50 MGPY Plant: | ||
50.979 + (49.3518) X 1.1653 = -6.53 |
100 MGPY Plant: | ||
50.979 + (49.3518) X 1.1195 = -4.27. |
Therefore, a 50 million gallon per year plant is expected to increase area processor basis levels from an average -11.45 CZ to -6.53 CZ, a gain of nearly 5 cents. A 100 million gallon per year plant is forecast to increase values to -4.27 CZ, or an increase of nearly 71/4 cents. Using an average 1994-2004 crop year average price of $2.27 per bushel, the new expected prices become $2.32 and $2.34 per bushel, respectively.
Table 12: Iowa/Minnesota Corn Summary—75 Mile Draw
Current | 50 MGPY | 100 MGPY | ||||||||||
Beg Stx | 93,385 | 93,385 | 93,385 | |||||||||
Prod | 434,353 | 434,353 | 434,353 | |||||||||
Supply | 527,738 | 527,738 | 527,738 | |||||||||
Feed | 112,706 | 112,706 | 112,706 | |||||||||
Ethanol Use | 146,667 | 165,186 | 183,704 | |||||||||
Local | 259,373 | 277,892 | 296,410 | |||||||||
Exports | 174,980 | 174,980 | 174,980 | |||||||||
End Stx | 93,385 | 74,866 | 56,348 | |||||||||
End Stx/Use | 21.5 | % | 16.5 | % | 12.0 | % | ||||||
Beg Stx/Use | 1.2150 | 1.1653 | 1.1195 | |||||||||
Ave Basis | -11.45 | -6.53 | -4.27 | |||||||||
Iowa 94-04 | $ | 2.27 | $ | 2.32 | $ | 2.34 |
Yield Note
Constant corn yields are an implicit assumption in the above analysis. However, as the chart below shows, U.S. corn yields have been on the upswing of late, rising from an average of around 120 bushels per acre during the 3-year period represented by crop years 1900 through 1992 to 150+ per acre in the past three years. On a harvested acre basis, ethanol use has risen from an average of 5.6 bushels per acre during the earlier period, to 18.5 bpa in the latter period with 21+ bushels per acre required to meet estimated ethanol demand in the 2005/06 crop year.
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Similarly, total corn use per harvested acre has increased by 28 bushels per acre, which is slightly below the 30.8 per bushel increase in yield realized for the period described. Thus, while a 5 to 7 cent gain in basis levels is forecast, this is likely to buffered should seed technology continue to boost yields.
DDG Prices
Part of this assignment included estimating the impact of expanded ethanol production on the price of distillers dried grains. Table 13 below provides relevant information on (1) annual ethanol grind (millions of bushels; (2) average U.S. producer corn prices; (3) average distiller grain prices, fob Lawrenceburg, Indiana; (4) average 48% soybean meal prices, fob Decatur, Illinois; (5) the spread per pound between soybean meal and DDG prices; and (6) the same spread between Distillers Dried Grain prices and corn prices, on a per pound basis.
Table 13: Historical/Forecasted Feed Prices
Ethanol | Ave | DDG's | 48% | SBM/DDG | DDG/Corn | |||||||||||||||||||
Crop Year | Grind | Corn | Lawrence | Dctr SBM | Per lb | Per lb | ||||||||||||||||||
90 | 349 | $ | 2.28 | $ | 124.88 | $ | 181.38 | $ | 0.0283 | $ | 0.0217 | |||||||||||||
91 | 398 | $ | 2.37 | $ | 122.81 | $ | 189.21 | $ | 0.0332 | $ | 0.0191 | |||||||||||||
92 | 426 | $ | 2.07 | $ | 122.02 | $ | 193.75 | $ | 0.0359 | $ | 0.0240 | |||||||||||||
93 | 458 | $ | 2.50 | $ | 123.47 | $ | 192.86 | $ | 0.0347 | $ | 0.0171 | |||||||||||||
94 | 533 | $ | 2.26 | $ | 106.69 | $ | 162.55 | $ | 0.0279 | $ | 0.0130 | |||||||||||||
95 | 396 | $ | 3.24 | $ | 152.90 | $ | 235.92 | $ | 0.0415 | $ | 0.0186 | |||||||||||||
96 | 429 | $ | 2.71 | $ | 141.59 | $ | 270.90 | $ | 0.0647 | $ | 0.0224 | |||||||||||||
97 | 481 | $ | 2.43 | $ | 107.78 | $ | 185.28 | $ | 0.0388 | $ | 0.0105 | |||||||||||||
98 | 526 | $ | 1.94 | $ | 84.92 | $ | 138.55 | $ | 0.0268 | $ | 0.0078 | |||||||||||||
99 | 566 | $ | 1.82 | $ | 80.90 | $ | 167.70 | $ | 0.0434 | $ | 0.0080 | |||||||||||||
00 | 628 | $ | 1.85 | $ | 80.57 | $ | 173.60 | $ | 0.0465 | $ | 0.0072 | |||||||||||||
01 | 706 | $ | 1.97 | $ | 77.27 | $ | 167.60 | $ | 0.0452 | $ | 0.0035 | |||||||||||||
02 | 996 | $ | 2.32 | $ | 86.62 | $ | 181.60 | $ | 0.0475 | $ | 0.0019 | |||||||||||||
03 | 1,168 | $ | 2.42 | $ | 114.03 | $ | 256.05 | $ | 0.0710 | $ | 0.0138 | |||||||||||||
04 | 1,323 | $ | 2.06 | $ | 76.38 | $ | 182.89 | $ | 0.0533 | $ | 0.0014 | |||||||||||||
05 | 1,575 | $ | 1.80 | $ | 68.29 | $ | 180.00 | $ | 0.0559 | $ | 0.0020 | |||||||||||||
Forecast | ||||||||||||||||||||||||
06 | 1,600 | $ | 2.15 | $ | 71.52 | $ | 155.00 | $ | 0.0417 | ($ | 0.0026 | ) | ||||||||||||
07 | 1,625 | $ | 2.25 | $ | 75.09 | $ | 163.00 | $ | 0.0440 | ($ | 0.0022 | ) | ||||||||||||
08 | 1,650 | $ | 2.35 | $ | 78.66 | $ | 176.50 | $ | 0.0489 | ($ | 0.0018 | ) | ||||||||||||
09 | 1,675 | $ | 2.40 | $ | 80.45 | $ | 185.00 | $ | 0.0523 | ($ | 0.0018 | ) | ||||||||||||
10 | 1,700 | $ | 2.45 | $ | 82.23 | $ | 183.50 | $ | 0.0506 | ($ | 0.0018 | ) | ||||||||||||
11 | 1,725 | $ | 2.45 | $ | 82.23 | $ | 182.50 | $ | 0.0501 | ($ | 0.0022 | ) | ||||||||||||
12 | 1,750 | $ | 2.45 | $ | 82.23 | $ | 181.50 | $ | 0.0496 | ($ | 0.0025 | ) | ||||||||||||
13 | 1,775 | $ | 2.45 | $ | 82.23 | $ | 177.00 | $ | 0.0474 | ($ | 0.0029 | ) | ||||||||||||
14 | 1,800 | $ | 2.45 | $ | 82.23 | $ | 176.00 | $ | 0.0469 | ($ | 0.0033 | ) |
Also shown in the table are USDA baseline corn and soybean meal price projections for crop years 2006 through 2014. The USDA has also forecast corn consumption by category through 2014 but the growth in ethanol production has out-paced the early year estimates. Because of this, the USDA’s 08/09 ethanol use forecast of 1.6 bbu has been moved ahead to the 2006 crop year and then increased at the rate of 25 mbu per year. However, this past August, the new energy law was passed which requires ethanol production to nearly double to 7.5 billion gallons a year by 2012. The Environmental Protection Agency expects the U.S. oil industry will meet the EPA’s new standard that requires 2.78 percent of gasoline sold next year to be renewable fuel, such as ethanol. As a result, the above projections appear conservative.
From the above, the following analyses were completed:
13
• | Average farm corn price compared to Lawrenceburg DDG prices; | ||
• | DDG prices compared to Decatur soybean meal prices; | ||
• | Corn prices were found to have a closer correction with DDG prices than soybean meal; | ||
• | Next, an analysis was made of the spread between corn and DDG prices versus annual ethanol grind and average corn prices; | ||
• | We next assumed the USDA’s projections through 2014 for corn and soybean meal prices were valid; | ||
• | Using the USDA’s corn price and ethanol forecasts, we then projected expected DDG price levels through 2014. |
DDG prices are expected to range between $71.50 and $82.25 per ton for the forecast period. As a result of rising production, the forecast suggests DDG’s will be priced a slight discount to corn, continuing a trend which has largely been in place since the early 90’s.
Larry Shonkwiler | ||
Market Analyst | ||
FCStone, LLC | ||
January 3, 2006 |
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