World Grain : Episodes and Aftermaths

Transcription

1 PRX NGFA, Page 1 World Grain : Episodes and Aftermaths NGFA Country Elevator Conference Kansas City, December 7, 215 Bill Hudson PRX Preamble: EPA Ethanol Final Rule Wealth Build Episode 27-8 to Aftermath to

2 PRX NGFA, Page 2 EPA Ethanol Final Rule on Nov Key General Points Final Rule leaves rationale of Proposed Rule unchanged: E-1 Blend Wall and substantial shortfall of cellulosic and other advanced biofuels means that EPA must apply general waiver of inadequate domestic supply. Final Rule corrects errors in determining D6 RVO for 214, and updates 215 and 216 calculations with EIA data since May-215. The fundamental objective of the RFS remains clear: To increase the use of renewable fuels every year through at least 222 in order to reduce greenhouse gas emissions and increase energy security. The RFS program can be thought of as a market forcing policy. The market is capable of responding to the ambitious standards set in the Final Rule by expanding all segments of the market needed to increase renewable fuel supply and modify pricing to provide incentives for the production and use of competitive renewable fuels.

3 PRX NGFA, Page 3 RENEWABLE VOLUME OBLIGATIONS IN EPA FINAL RULE, Nov PRX 215, File PRX_RFS2_DisplayREV_Start.xls, Nov-3-15 Calendar Years Item Source Unit Type Original Applicable Volumes 1 Total Renewable Fuel EPA, NPRM bil RINs Advanced Biofuel EPA, NPRM bil RINs Conventional Biofuel EPA, NPRM bil RINs EPA Proposed Waivers May, Total Renewable Fuel EPA, NPRM bil RINs Advanced Biofuel EPA, NPRM bil RINs Conventional Biofuel EPA, NPRM bil RINs EPA Final Rule, Nov-3, Total Renewable Fuel EPA, Final bil RINs Advanced Biofuel EPA, Final bil RINs Conventional Biofuel EPA, Final bil RINs Advanced Biofuel EPA, Final bil gals eth equiv Cellulosic Biofuel EPA, Final bil RINs Biomass-based diesel EPA, Final bil gals actual EPA, Final energy ratio EPA, Final bil gals eth equiv Other Advanced Biofuel (4 - (5 + 8)) EPA, Final bil gals eth equiv Gasoline demand EPA, Final bil gals actual Renewable gasoline blended EPA, Final bil gals actual

4 PRX NGFA, Page 4 RENEWABLE VOLUME OBLIGATIONS IN EPA FINAL RULE, Nov PRX 215, File PRX_RFS2_DisplayREV_Start.xls, Nov-3-15 Calendar Years Item Source Unit Type Original Applicable Volumes 1 Total Renewable Fuel EPA, NPRM bil RINs Advanced Biofuel EPA, NPRM bil RINs Conventional Biofuel EPA, NPRM bil RINs EPA Proposed Waivers May, Total Renewable Fuel EPA, NPRM bil RINs Advanced Biofuel EPA, NPRM bil RINs Conventional Biofuel EPA, NPRM bil RINs EPA Final Rule, Nov-3, Total Renewable Fuel EPA, Final bil RINs Advanced Biofuel EPA, Final bil RINs Conventional Biofuel EPA, Final bil RINs Advanced Biofuel EPA, Final bil gals eth equiv Cellulosic Biofuel EPA, Final bil RINs Biomass-based diesel EPA, Final bil gals actual EPA, Final energy ratio EPA, Final bil gals eth equiv Other Advanced Biofuel (4 - (5 + 8)) EPA, Final bil gals eth equiv Gasoline demand EPA, Final bil gals actual Renewable gasoline blended EPA, Final bil gals actual PRX Forecasts Crop Years Gasoline demand STEO, PRX bil gals Conventional Ethanol 19 Production STEO, PRX bil gals Exports DOC, PRX bil gals Imports DOC, PRX bil gals Cellulosic Production, Use PRX bil gals Conventional Domestic Use PRX bil gals Calculated inclusion rate PRX pct 1.2% 9.77% 9.86% 1.1%

5 PRX NGFA, Page 5 EPA s Analysis of RFS Impact on Global Temperature Change* from full 36-billion gallon RFS Implementation by 222, in 25 Climate Sensitivity per UN IPCC (AR4, 27), Change in Global Mean Temp ( o C) with doubling of CO-2 equiv Year Temperature reduction from GHG reduction due to RFS2 increased Renewable Fuels in 222, per EPA* ( o C) Resulting Change in Global Mean Temperature ( o C), per UN IPCC & EPA* *From Table V.E-1, EPA Preamble to Final Rule, Changes to Renewable Fuel Standard Program, February 3, 21 EPA says that the RFS can thus be seen as directionally beneficial.

6 PRX NGFA, Page 6 WEALTH BUILD EPISODE. ERS Cost of Production Survey of US Corn & Soybeans Used to Estimate Sector s Gross Revenue, Costs, & Returns in $Bil Dollars/bushel CORN + SOYBEANS: GROSS REVENUE OF PRODUCTION, Corn + Soybeans gross value, $bil Corn + Soybeans gross value, $bil, forecast US corn farm price, $/bu US corn farm price, $/bu, forecast PRX_BS5_CornBeanIncome_Start, GTB-15-11, Nov In EPISODE, gross revenue of corn + soybeans doubled. $ Billion 16 In AFTERMATH, gross revenue will decline but 14 finally creep up, with improving exports

7 PRX NGFA, Page 7 Latest ERA Actual is , ERS Projected , with Future Projections by PRX Blue Sky Model $Billion 16 US CORN + SOYBEANS: TOTAL COSTS OF PRODUCTION, PRX_BS5_CornBeanIncome_Start, GTB-15-11, Nov In past decade, emergence of a $1 billion industrial input structure, propelling yield growth of American corn-soybean sector. But after 214 input costs will need to decline before perhaps increasing again. 1 8 Land Mach Overhd Chem Fert Seeds

8 PRX NGFA, Page 8 Was the astonishing seven-year wealth gain due mainly to the RFS? Are many farmers now holding their grain awaiting return of high prices? US CORN + SOYBEANS: GROSS REVENUE MINUS COSTS, Dollars/bushel PRX_BS5_CornBeanIncome_Start, GTB-15-11, Nov $ Billion Crop Insurance, $bil forecast Crop Insurance, $bil Gross return over Total Costs + CCC, $bil Gross return over Total Costs + CCC, $bil, forecast Gross return over Total Costs, $bil Gross return over Total Costs, $bil, forecast US corn farm price, $/bu US corn farm price, $/bu, forecast to Episode with $2 billion net income gain!

9 PRX NGFA, Page 9 Or Will the Aftermath of be a steady decline in corn real price? US CORN FARM PRICE, , Actual & Adjusted for Inflation Dollars per bushel PRX_CornPriceLT, GTB-15-11, Nov-1-15 Historical USDA data, see and historical CPI see Corn farm price adjusted for inflation (CPI, 1985$) shows steady downtrend Complete 18-year USDA record of actual US annual corn farm price.

10 PRX NGFA, Page 1 Or can some Episodes have lasting effects? 16 US CORN FARM PRICE, , with Five "High Price Episodes" Dollars per bushel 18 WW One Dust Bowl PRX_CornPriceLT, GTB-15-11, Nov-1-15 WW Two OPEC- Russia US- China Corn price adjusted by CPI (1985$) Actual corn price, unadjusted

11 PRX NGFA, Page 11 Dollars per bushel 18 WW One 16 Dust Bowl WW Two OPEC- Russia US- China US CORN FARM PRICE, , with Five "High Price Episodes" Corn price adjusted for inflation by Consumer Price Index (1995$) PRX_CornPriceLT, GTB-15-11, Nov Actual corn price, unadjusted Dollars per barrel 125 The three early Corn High Price Episodes had to do only with Feed and Food, not Fuel! OPEC- US- Russia China Only the history has a bearing on any forecast for the future. US CRUDE OIL PRICE, , Actual & Adjusted for Inflation Energy Act 1978 adds Volumetric Ethanol Excise Tax Credit (VEETC) Actual crude oil price, unadjusted PRX_CornPriceLT, GTB-15-11, Nov Crude oil price adjusted for inflation

12 PRX NGFA, Page 12 Dollars per bushel 18 WW One 16 Dust Bowl WW Two OPEC- Russia US- China US CORN FARM PRICE, , with Five "High Price Episodes" Corn price adjusted for inflation by Consumer Price Index (1995$) PRX_CornPriceLT, GTB-15-11, Nov Actual corn price, unadjusted Million acres 1 CHINA NET IMPORTS of CORN & SOYBEANS, US ACREAGE EQUIVALENT China's corn and soybean imports in will total 63 mil acres, from the Americas, equivalent to corn production of nearly 1 billion bushels

13 PRX NGFA, Page 13 Index, 25 =1, Deflated by PPI Food (USBLS) 5 45 US CORN RETURN over COSTS and US SOYBEANS RETURN over COSTS, without CCC transfers & Crop insurance, $ Billion CHINA-DRIVEN COMMODITY PRICE SUPER-CYCLE, PRX_PPI_anal, GTB-15-1, Oct-9-15 PRX_BS5_CornBeanIncome_Start, GTB-15-11, Nov Soybean Gross return over Total Costs w/o CCC & crop ins, $bil Corn Gross return over Total Costs w/o CCC & crop ins, $bil SOYBEANS CORN Wheat Corn Soybeans Crude Oil Price Rice Cotton Sugar

14 PRX NGFA, Page 14 CHINA-DRIVEN COMMODITY PRICE SUPER-CYCLE, Index, 25 =1, Deflated by PPI Food (USBLS) 5 45 PRX_PPI_anal, GTB-15-1, Oct Wheat Corn Soybeans Crude Oil Price Rice Cotton Sugar Percent US GDP Growth Ten-year Treasuries PRX_PPI_anal, GTB-15-1, Oct

15 PRX NGFA, Page 15 PRX Corn Price Theory in Regression Model Form US CORN FARM PRICE, , ACTUAL AND MODELS Regression Statistics Multiple R.96 R Square.92 Adjusted R Square.91 Standard Error.37 Observations 56. Coefficients Intercept 2.31 Spply % Prv Yr Use Crude Oil Price.2 Carry Out to Use -1.8 Loan rate.48 Monetary Deflator.21 Model matches the ups and downs of the pre-1973 price pattern. Nonetheless, starting with the 195s is necessary for the model to capture the "plateau shift" of the 197s. $/bu PRX_ROI_Revised, GTB-15-11, Nov-1-15 PRX 5-Factor Model includes Corn Supply percent previous year, Corn Carryot-to-Use, Loan Rate, Monetary deflator, and Crude Oil Price (WTI) a proxy for overall investor interest in all commodities. USDA- 215 #41 US Farm Price, PRX BS # US Farm Price, Actual.5 US Farm Price, USDA Baseline

16 PRX NGFA, Page 16 PRX Corn Price Theory in Words of a Long Time Grain Trader (John Stewart) Cash corn prices are very strongly influenced by corn futures prices, which are primarily influenced by speculators whose trading volume dwarfs that of producers. This can be a good thing or a bad thing for producers. The high prices we have experienced for several years [27-213] were attributable to large speculative long positions. Crude oil is one of the key commodities that influence and fund large speculators. They see this as an indicator of inflationary expectations, and, rightly or wrongly, these traders, who control very large amounts of money, will buy a basket of commodities. Grains, including corn, were part of this basket, and this is why we have used the crude oil price in our regression model and, up to now (!), it has greatly improved the fit.

17 PRX NGFA, Page 17 Let s look ahead to the Aftermath of the Wealth Build Episode CRUDE OIL PRICE ASSUMPTION, $/bbl, unadjusted for inflation PRX_ROI_Revised, GTB-15-11, Nov Crude Oil (RAC), Actual, or EIA STEO Crude Oil, PRX Proposed, BS #39 Crude Oil, USDOE REF AEO215 Crude Oil, USDOE LOW AEO215 Crude Oil, USDOE HIGH AEO215 DOE's 215 Annual Energy Outlook. Issued , displays the enormous range of uncertainty between the High and Low Cases DOE HIGH DOE REF-AEO Apr DOE LOW 215 PRX # Blue Sky Model #41 assumes that crude oil price will oscillate in range $5 - $75 BS Model Corn Price Results $3.5 $3.75 $4.16

18 PRX NGFA, Page 18 $/barrel 12 $/bushel RFS2 Crude oil forecast CRUDE OIL PRICE (WTI) & CORN PRICE (US FARM) 6 4 China drives up crude oil price Corn Corn forecast Crude oil Bushels per barrel RFS2 Ethanol incentive UP PRX 215, File PRX_OilCornRatio, Nov-1-15 RATIO OF CRUDE OIL PRICE TO CORN PRICE 2 15 Profitability drives corn ethanol well before RFS2 1 5 Ethanol incentive DOWN PRX 215, File PRX_OilCornRatio, Nov-1-15

19 PRX NGFA, Page 19 One OUTSIDE CHANCE in 5+ years is E-25 MID-LEVEL ETHANOL BLENDS Can we produce enough fuel feedstocks? Yes, due to Surplus Feedgrain Capacity of Three Main World Exporters PRX Simplified US Corn Surplus Calculation, for AG-Auto-Ethanol Working Group October 22, 215 PRX Bill Hudson

20 PRX NGFA, Page 2 From Current Official USDA Data World Total Grains & Oilseeds Production, , 317 MMT PRX 215, File PRX_WorldTotalStocks, Oct-9-15 Other Oilseeds, 196 MMT Soybeans, 319 MMT World "Food" is mainly Wheat and Rice, not widely used for fuel Wheat (& Rye), 74 MMT Other Feed Grains, 274 MMT Corn, 19 MMT Rice, 479 MMT World "Feed" for meat is mainly oilseeds & feedgrains, which are in surplus, especially corn can be used for fuel without affecting World "Food"

21 PRX NGFA, Page 21 World Total Grains & Total Oilseeds by Origin: Geography Causes Surplus WORLD GRAIN & OILSEED PRODUCTION STRUCTURE, Total Grains and Oilseed Production PRX 215, File PRX_WorldTotalStocks, Oct-9-15 Population 39% 11% Export Hubs (Abundance) World excl Hubs (Scarcity) Most of the 89% do not have money for grain & oilseed imports as feed for meat Total Grains and Oilseed Production Population Export Rest of Export Rest of Crop Yr World Hubs World Crop Yr World Hubs World mmt mmt mmt mil mil mil pct pct pct pct 39% 61% 11% 89% The Three Major Export Hubs are (1) US/CN, (2) Brazl/Arg, & (3) Black Sea

22 PRX NGFA, Page 22 World Grains & Oilseeds by Surplus Export Hubs Three Export Hubs = 11% World Population, but 39% World Grain/Oilseed Production = 11/39 = Perennial Regional Feedgrains/Oilseed Surpluses Russian Black Sea = 3/7 U$ & Canada = 5/22 Brazil- Argentina = 3/1... Unless rest of World (89/61) has money to buy meat, or unless surpluses used for fuel.

23 PRX NGFA, Page 23 MMT WORLD TOTAL GRAINS & OILSEEDS: CONSUMPTION & TRADE PRX 215, File PRX_WorldTotalStocks, Nov-1-15 Data from USDA-PSD Consumption from trade Consumption from domestic production Trade share consumption Trade share consumption Pct 21% 18% 15% Consumption from trade up 1/3rd since 25, of which 7% supplied by Three Hubs 2 12% 15 9% 1 Consumption from domestic production 6% 5 3% %

24 PRX NGFA, Page 24 MMT WORLD TOTAL GRAINS & OILSEEDS: EXPORTS PRX 215, File PRX_WorldTotalStocks, Nov-1-15 Data from USDA-PSD All other exporters Minor Exporters (S. Amer, S. Africa & Oceania) FSU-12 Exports Brazil & Argentina Exports US & CN Exports Three Hubs ShareTotal Exports All Others Pct 1% 9% 8% 42 Aus, S. Africa, & Oth S. Amer 7% 36 3 Share of trade by Three Major Export Hubs: US/CN, Brzl & Arg, FSU-12 Russia Black Sea 6% 5% 24 4% Brzl & Arg 18 3% 12 2% 6 United States 1% %

25 PRX NGFA, Page 25 World Grains & Oilseeds INCREASE is by Export Hubs Million metric tons WORLD TOTAL GRAINS & OILSEEDS PRODUCTION, Export Hubs Total Grains & Olsds Prdn WEXhubs total prdn Source: USDA PSD Database and UN Population Division World total prdn, trend World total prdn, trend WEXhubs total prdn, trend The three Export Hubs are US-CN, Brzl- Arg, and Soviet Black Sea PRX 215, File PRX_WorldTotalStocks, Oct-9-15 Three Export Hubs, 11% world pop World total 317 mmt Reaction of Three Major Grain Export Hubs to paying demand for China soybeans and US corn ethanol was production increase of 368 mmt of grains & oilseeds, about 14 billion bushels, in one decade. 1 5 World excl Export Hubs, 89% world pop

26 PRX NGFA, Page 26 Question from AAE-WG audience: What is increase in corn planted acres since the 27 Energy Act? The subtotal of corn + soybean acres has increased as a share of principal crops + CRP, but the overall total of all major crops + CRP acres has declined and is well within the EPA 42 rule. US MAJOR FIELD CROPS AREA PLANTED, to CROP YEARS PRX 215, File PRX_BS6_Executive_Start, Jun Crop All Feedgrains Oilseeds Corn + Total All Hay Other Principal Subtotal Total Other year Wheat Corn Sorghum Barley Oats Total Soy Sunseed Canola Total Soy Cotton Major Major Crops* CRP w/crp EPA* (19-18) mil ac mil ac mil ac mil ac mil ac mil ac mil ac mil ac mil ac mil ac mil ac mil ac mil ac mil ac mil ac mil ac mil ac mil ac mil ac mil ac cropland pasture & fallow Change from previous year, based on Jun USDA Acreage Report *Principal Crops 214 reported by NASS in Jun-215. EPA black numbers are officially reported. EPA compliance uses USDA-FSA in November, not to exceed the 42 of 27. Red estimates by PRX, today's date.

27 PRX NGFA, Page 27 Corn + soybean acreage has grown as a share of other crops (see previous page). Chart shows paid diversion of CCC corn programs, but not of other feedgrains, wheat, and CRP (beginning in mid-198s). Mil ac US CORN & SOYBEAN AREA PLANTED, WITH CORN AREA SET-ASIDE for GOV'T PROGRAMS PRX 215, File PRX_US_Reference_Start.xls, Oct corn (new) Fuel Ethanol replaces (old) Paid Diversion In 2s, US got BOTH new money from fuel markets AND from China's meat eaters! Corn "base acres" in CRP, per USDA-ERS- AREI Corn area for Paid Diversion and Acreage Reduction Programs Corn area for fuel ethanol (adj. For DDG) Soybean area exported to China Soybean area planted for other than China Corn Area for Exports to FSU 2 Corn area planted excluding for Export to FSU, Govt Programs, & RFS

28 PRX NGFA, Page 28 BU/AC 225 CORN YIELD TREND FOR EXPORT HUBS VS. REST OF WORLD PRX 214, File PRX_WorldCornYields, Dec-1-14 World excl Hubs Yield, bu/ac World excl Hubs Trend, , bu/ac World excl Hubs Trend, , bu/ac, extended World excl Hubs Trend, , bu/ac World excl Hubs Trend, , bu/ac, extended Three Export Hubs Yield, bu/ac Three Export Hubs Trend, , bu/ac Three Export Hubs Trend, , bu/ac, extended Three Export Hubs Trend, , bu/ac Three Export Hubs Trend, , bu/ac, extended World Corn, per official USDA data Three Export Hubs = 34 Percent of World Corn Area Exportable corn surplus grows unless world has more money for meat and/or uses corn as fuel 75 Population/Corn Area Ratios 5 25 World excl Hubs = 66 Percent of World Corn Area Region Share Share World World pop corn area US& CN 5% 2% Arg & Brzl 3% 1% FSU-12 3% 5% Three Export Hubs 11% 34% World excl Hubs 89% 66%

29 PRX NGFA, Page 29 BU/AC CORN YIELD TRENDS FOR MAIN THREE EXPORT HUBS US & CN Yield, bu/ac US & CN Trend, , bu/ac US & CN Trend, , bu/ac US & CN Trend, , bu/ac, extended Brzl-Arg Yield, bu/ac Brzl-Arg Trend, , bu/ac Brzl-Arg Trend, 2-214, bu/ac Brzl-Arg Trend, 2-214, bu/ac, extended FSU-12 Yield, bu/ac FSU-12 Trend, , bu/ac FSU-12 Trend, 2-214, bu/ac FSU-12 Trend, 2-214, bu/ac, extended PRX 215, File PRX_WorldCornYields, Aug US & CN Corn, Long-term US & CN, 2% world area 75 5 FSU-12, 4% world area US competitors' yields accelerated with global price super-cycle, strong dollar. 25 Brzl & Arg, 1% world area

30 PRX NGFA, Page 3 US Corn, 23 CORN YIELD TREND METHODS, USDA BASELINE vs. PRX BLUE SKY BUSHELS/ACRE PRX 215, File PRX_USDAbaseline_215er, Oct USDA_Actual USDA_27, 1.9 bu/ac per yr tech growth USDA_28, 2 bu/ac per yr tech growth USDA_29, 2 bu/ac per yr tech growth USDA_21, 2 bu/ac per yr tech growth USDA_211, 2 bu/ac per yr tech growth USDA_212, 2 bu/ac per yr tech growth USDA_213, 1.9 bu/ac per yr tech growth USDA_214, 2 bu/ac per yr tech growth USDA_215, 2 bu/ac per yr growth USDA_215 Trend PRX trend , 1.88 bu/ac per yr tech growth PRX BS#4 with recent volatility pattern USDA baseline assumes annual "technological trend growth" (usually 2. bu/ac per yr) and "normal weather." Use 195 for PRX 23 calculation. The genetic potential yield is more than double this figure, as shown by NCGA corn contest winners. BTW, what about Climate Change? NOAA says May-Aug 212 was a meteorological "flash drought" with no external forcing, such as El Nino/La Nina or GHG emissions

31 PRX NGFA, Page 31 Dan Glickman, Secretary of Ag , who established the Climate Change Office in 1997 under Chief Economist Keith Collins, said in early 215: We could be doing much more to educate producers and establish tools like longer term weather and climate forecasting. (Dan: Take your pick from these 42!) (Note: USDA-ERS published a Climate Change Impact Study on US Crop Yields Nov-3-215, using some of the UN models shown here.)

32 PRX NGFA, Page 32 Speculation: USDA Baseline Team not willing to adopt AVERAGE of UNIPCC regional temp-precip models Degrees F CORNBELT 12 STATES JJA TEMP, , OBSERVED VS. UNIPCC MODELS PRX 215, File PRX_Spencer_Cbmaster, Oct-9-15 Source: Roy Spencer, UAH UNIPCC regional models do not capture annual volatility of observed temps, and model trend since 196 rises 2.4 times faster than observed temps Very long-term trend of observed cornbelt temps shows very slight increase. 64 Cornbelt (12 states) Average Temp JJA Observed, degree F Cornbelt (12 states) Average Temp JJA Observed, TREND CMIP5 42 model avg, 38-48N, E (Corn Belt), Temp JJA CMIP5 42 model avg, 38-48N, E (Corn Belt), Temp JJA, TREND

33 PRX NGFA, Page 33 Degrees F 18 CORNBELT 12 STATES JJA PRECIP, , OBSERVED VS. UNIPCC MODELS PRX 215, File PRX_Spencer_Cbmaster, Oct-9-1 Source: Roy Spencer, UAH 16 UNIPCC models completely fail to capture annual volatility of observed precip, a key feature of region Very Slight upward trend in JJA precip since 196, similar annual volatility. Cornbelt (12 states) Average Precip JJA Observed, inches 4 Cornbelt (12 states) Average Precip JJA Observed, TREND CMIP5 42 model avg, 38-48N, E (Corn Belt), Precip JJA CMIP5 42 model avg, 38-48N, E (Corn Belt), Precip JJA, TREND

34 PRX NGFA, Page 34 Latest USDOE-AEO, Dec-214, misses impact of cheap gasoline on volume of usage. Million gallons TOTAL MOTOR GASOLINE ASSUMPTIONS IN EIA AEO215 AEO 215 AEO 215 forecast breaks with Actual PRX_AEO_Apr215_Start, GTB-14-1, Nov-1-15 STEO to Sep-215 How much more do we drive with cheap gas? Total Mo Gas (with all ethanol), Actual Total Mo Gas (with all ethanol), Forecast Mo Gas excluding E85 Blend PRX BS#4 Total Mo Gas (w/ethanol) PRX trend for BS #41, with no successful stringent MPG standards If E25/E3 successful, apparent overall efficiency gain is enormous 11 AEO215 says the reduction from 213 to 24 will be due to "increasingly stringent fuel economy standards for gasoline in transportation sector," but they do not identify how. Better engines only, greater mix of small cars, changing BOTH engines and fuel mix to high octane, or what?

35 PRX NGFA, Page 35 WITH GASOLINE USAGE IN AEO 215, ESTIMATED ETHANOL VOLUME & BUSHELS OF CORN DEMAND WITH 7% ACCEPTANCE PRX 215, File PRX_NCGA_E25_ver5.xls, Oct Eventual E25 GASOLINE USE STEO AEO 215 Change 1 Domestic gas use mil gals used as E pct 2.% 2.% 2.% 3 used as E1 pct 93.% 6.5% 28.% 4 used as E25 (or E15 above) pct 5.% 37.5% 7.% 5 Ethanol domestic volume used 6 used as E1, conventional mil gal used as E25, conventional mil gal Total used, conventional mil gal used as cellulosic mil gal Ethanol domestic volume used mil gal Ethanol domestic volume used pct 9.3% 9.6% 1.6% 15.5% 2.6% 12 Total conventional ethanol used mil gal Conventional ethanol net exports mil gal Conventional ethanol production mil gal Approx additional ethanol needed for 7% E25 in 23

36 PRX NGFA, Page 36 WITH GASOLINE USAGE IN AEO 215, ESTIMATED ETHANOL VOLUME & BUSHELS OF CORN DEMAND WITH 7% ACCEPTANCE PRX 215, File PRX_NCGA_E25_ver5.xls, Oct Eventual E25 GASOLINE USE STEO AEO 215 Change 1 Domestic gas use mil gals used as E pct 2.% 2.% 2.% 3 used as E1 pct 93.% 6.5% 28.% 4 used as E25 (or E15 above) pct 5.% 37.5% 7.% 5 Ethanol domestic volume used 6 used as E1, conventional mil gal used as E25, conventional mil gal Total used, conventional mil gal used as cellulosic mil gal Ethanol domestic volume used mil gal Ethanol domestic volume used pct 9.3% 9.6% 1.6% 15.5% 2.6% 12 Total conventional ethanol used mil gal Conventional ethanol net exports mil gal Conventional ethanol production mil gal PRX Ethanol yield gals/bu PRX calc corn/milo ethanol prdn mil bu PRX DDG prdn estimate mt/bu PRX DDG prdn estimate mmt PRX DDG domestic fed pct 74.2% 67.8% 63.1% 58.1% 53.1% 22 PRX DDG domestic fed mmt PRX DDG domestic fed corn displ bu/mt PRX DDG domestic fed corn displ mil bu Total 26 PRX calc corn/milo excl DDG fed displ mil bu PRX DDG export estimate pct 25.8% 32.2% 36.9% 41.9% 46.9% 29 PRX DDG export estimate mmt PRX DDG export estimate mil bu PRX Area Planted & Trend mil ac PRX Area Harvested & Trend mil ac PRX Yield and Trend bu/ac PRX Corn Production trend mil bu Surplus (-), Deficit (+) mil bu -255 Annual corn surplus 23

37 PRX NGFA, Page 37 US CORN & SOYBEAN DEMAND SUMMARY, Blue Sky #41 PRX_BS1_OverviewDeck_Start, GTB-15-11, Nov-1-15, #41 Item Unit Crop Year minus Corn Ethanol Use 1 Eth Prdn mil bu Eth Prdn bil gal Eth Exp bil gal Eth Dmstc bil gal Mo Gas bil gal Eth E1 bil gal Eth E15+ bil gal Corn Exports by Type Summary 8 Whole Corn mil bu Ethanol Eqv mil bu DDG/CGF Eq mil bu Meat Eqv mil bu Subtotal mil bu Feed & Other mil bu Corn Ttl Use mil bu Soybean Export & Biodiesel Use 15 Exports mil bu Soyoil Bio mil gals Shr Crush pct 22.7% 26.4% 23.% 23.% 23.9% 26.1% 27.7% 25.5% 26.2% 27.% 28.4% 31.3% 29.1% 29.9% 6.9% 18 Corn oil indst mil gals Ttl Use mil bu

38 PRX NGFA, Page 38 $/barrel 12 $/bushel China drives up crude oil price, leading to commdity price supercycle RFS2 Crude oil forecast CRUDE OIL PRICE (WTI) & CORN PRICE (US FARM) 4 Corn Corn forecast Crude oil $ Billion PRX 215, File PRX_OilCornRatio, Nov-1-15 Pre- China US Corn-Soybean Sector has $144 bil Wealth Build, China Shock China Aftershock PRX 215, File PRX_OilCornRatio, Nov-1-15 US CORN + SOYBEANS: GROSS REVENUE MINUS COSTS, Requires lower input costs, ethanol exports, decent E15, and continued China bean import growth What's next, and how soon?

39 PRX NGFA, Page 39 China s absolute food oil & protein meal dependence on the Americas. MT CHINA VEGETABLE OIL CONSUMPTION & SOURCE PRX_ChinaAnalNew, GTB-15-8, Nov Soyoil imported & from Crush All other imported oils Total Oils crushed from domestic oilseed production Total Oils crushed from domestic oilseed production, trend China's vegetable oil consumption is 68.4 percent imported, providing a continuing floor for world oilseed demand

40 PRX NGFA, Page 4 WORLD ACREAGE OF FEEDGRAINS & SOYBEANS DEVOTED TO TRADE Million Acres SOYBEANS World Soybean World FG 1 5 FEEDGRAINS PRX 215, File PRX_BS_CSB_225, Nov WORLD ACREAGE OF FEEDGRAINS & SOYBEANS DEVOTED TO TRADE, with Share by China Million Acres China share world FG & soybean trade China Share 5% CHINA FG 4% CHINA BEANS 3% China FG China Soybean 1 2% Other World FG & Soybean China share World FG & Soybean 5 ALL OTHERS, FG & BEANS 1% PRX 215, File PRX_BS_CSB_225, Nov-1-15 %