What you might have missed Bioenergy Situation & Outlook Ag Lenders Conference David Ripplinger Fall 2018 Record US Corn Ethanol Production Record US Corn Ethanol Exports Expanding US Corn Ethanol Capacity (16.3 billion gallons) E15 EPA Hardship Waivers Chinese Ethanol Plans US Corn Ethanol Use>>Feed & Residual Accounting for Feedback Data: WASDE, Grain Crushing and Co-Products Production Report
2.8 gallons ethanol 17 pounds distillers grains.75 pounds corn oil From 1 bushel of corn 2.8 x 1.31 $3.67 etoh 17 x.065 $1.11 ddgs.75 x.2375 $.18 oil -3.03 $3.03 corn $1.92/bu Ethanol Crush Margins (Bushel-Basis South Dakota) $5.00 $4.50 $4.00 $3.50 $3.00 $2.50 $2.00 $1.50 $1.00 $0.50 $0.00 04/16 07/16 10/16 01/17 04/17 07/17 10/17 01/18 Capital & Other 04/18 Operating 07/18 Ethanol DDGs Corn Oil Corn Margin Expenses Data: USDA/AMS ($1.40) Corn Ethanol-US Production & Use Production & Use (Billion Gallons Per Year) 18 50 15 billion gallon mandate 16 45 14 40 12 35 30 10 25 8 20 6 15 4 10 2 5 0 08/13 08/14 08/15 08/16 08/17 08/18 Production Refiner and Blender Input Days in Storage Data: EIA Days in Storage Record Corn Ethanol Exports 2 billion gallons est. 2018 Ethanol Exports (thousand barrels) 6,000 5,000 4,000 3,000 2,000 1,000 0 11/16 03/17 07/17 11/17 03/18 07/18 Actual Year Previous What are the five largest US ethanol destinations (Jan-May 2018)? Data: EIA
Hardship Waivers The Renewable Fuel Standard (RFS) allows the EPA to waive the Renewable Volume Obligation (RVO) of small refiners (<75,000 bbls/day) enduring severe hardship due to the policy. The EPA under Scott Pruitt waived 19 of 20, 2016 waivers 790 million gallons 29 of 33, 2017 waivers 1.46 billion gallons Equivalent of 800 million bushels Should waived gallons be reallocated? D6 RIN Prices (cents) 100 90 80 70 60 50 Hardship 40 Waivers 30 Known 20 10 08/17 10/17 12/17 02/18 04/18 06/18 Data: Thomson Reuters Market Expansion Domestic: The administration has announced that it has begun working on new regulations to allow the use of E15. International Gasoline Markets (MBBLS/Day) Foreign: Much of the ag industry sees corn ethanol as the best opportunity for trade growth. China: Hasn t done much to show they will be able to achieve their stated E10 by 2020 goal. Data: Thomson Reuters
$4.00 $3.50 $3.00 $2.50 $2.00 $1.50 $1.00 $0.50 Soybean-Diesel Crush Margins (~+$1 for biodiesel) $0.00 03/17 06/17 09/17 12/17 03/18 06/18 Soybean Oil Methanol Diesel Margin $1.50 $1.00 $0.50 $0.00 $0.50 $1.00 $1.50 $2.00 Margin Million Gallons 180 160 140 120 100 80 60 40 20 Biodiesel Production & Sales Jan16 Apr16 Jul16 Oct16 Jan17 Apr17 Jul17 Oct17 Jan18 Apr18 Data: EIA Blender Credit Expires Production Sales Stocks Pacific Carbon California has created a carbon market for biofuels. Its Low Carbon Fuel Standard (LCFS) has set annual carbon intensity standards for fuels (CAP). An example pathway Fuel Producer: Red Trail Energy LLC Facility Name: Red Trail Energy LLC Midwest Corn, Ethanol, Dry Mill, 100% MDGS, NG 76.46 Regulated parties (blenders and refiners) are required to supply fuels with increasingly smaller carbon footprints over time. They can do by blending ever higher levels of biofuels or trading for permits from other parties that do (TRADE).
An Example Company X has the ability to easily blend ND corn ethanol with a carbon intensity of 76 g co2 e/mj with gasoline that has a carbon intensity of 96. The resulting blend has a carbon intensity of 94, this is above the 2018 standard so the refinery needs to trade for carbon credits. $250 $200 $150 California Carbon Credit Prices ($/MT) Importance/Impacts There is a mechanism that rewards incremental improvements in carbon reductions. $100 $50 $0 4/25/2016 11/23/2016 6/21/2017 1/3/2018 7/6/2018 $180/MT is real money. -> corn-ethanol refinery investments. -> corn production practices. For example, no till. -> new biofuel pathways.
Carbon Intensity of Beets, Beet-ethanol, and Corn-ethanol Energy Beet Process gco2eq/ wet short ton Emissions gco2eq/ MJ beet ethanol gco2eq/ MJ cornethanol Feedstock Production 21,615 10.1 15 Domestic Land Use Change 882 0.4 Land Use Change 15,556 7.1 28 Feedstock Transport 8,183 3.8 4 Total Upstream Emissions, Mean 44,954 21.0 47 *24 gallons/short ton; 89 MJ/gallon ethanol https://www.federalregister.gov/documents/2017/07/26/201715721/noticeofopportunitytocommentonananalysisofthegreenhousegasemissionsattributableto Calculator available at ag.ndsu.edu/bioeconomics Spiritwood Cellulosic 16 million gallon 280,000 tons of straw 120,000 tons of lignin Danish Technology Grand Forks Cellulosic Co-located at Simplot 18.8 million gallons 500,000 tons of waste (especially beet tailings, potato scraps) ~$60/ton straw
Oil! Record ND production in July Growing global demand ND Rig Count 10/18-71 10/17-54 10/14-192 Saudi Arabia $140 $120 $100 $80 $60 $40 $20 $0 2002 2004 2006 2008 2010 2012 2014 2016 2018 1,400 1,200 1,000 800 600 400 200