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Oil and Food Economics - All mixed up with Ethanol

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US Agriculture is a HUGE user of oil ! 10% of daily production


Here's an important statistic from the video.

The average American consumes:

+ Food... : 10 barrels per capita

+ Autos.. : 9 barrels

+ Homes : 7 barrels

= TOTAL = 25 barrels per capita



So what exactly are the pro and con arguments regarding the bubble bursting? As to demand, it is mentioned how while the U.S. per-capita oil consumption is 25 barrels annually, both China and India are small in comparison, with China consuming only two barrels per person per year, with India consuming less than one barrel per person per year. Given that China and India have 1.3 and 1.1 billion citizens, respectively, there is an expectation that oil demand will increase in each of these countries as more of their citizens look to enjoy the fruits of the world, such as air conditioning, automobiles, refrigeration, and computers.


As for global oil consumption, it is down in total for the OECD nations (which account for more than half of all global oil demand). Demand itself is currently running about 86 million barrels a day and is expected to be relatively flat as nations cut back on consumption, in particular, automobile miles traveled. Yet, oil demand continues to grow in the developing world, and it will be difficult for even developed countries to reverse their trends quickly. As stated by Byron Wien, the chief investment strategist at Pequot Capital Management, "The world isn't finding oil fast enough to replace the 3% to 4% that gets pumped every year."

/source: http://www.bestwaytoinvest.com/stories/oil...e-argument-weak


Country population : Per capita : Annual Oil : Daily barrels

USA : Food ............ : 10. bbl/yr. : 3.07 bn bbls : 8.4 mn (10%)

USA : Autos ........... : 9.0 bbl/yr. : 2.76 bn bbls : 7.6 mn

USA : Homes ......... : 7.0 bbl/yr. : 2.15 bn bbls : 5.9 mn

U.S.A.. / 0,307 mn. . : 26. bbl/yr. : 7.98 bn bbls : 21.9 mn (25%)

Europe/ 0,500 mn. . : 7.0 bbl/yr. : 3.50 bn bbls : 9.6 mn (11%)

China. / 1,340 mn. . : 2.3 bbl/yr. : 3.08 bn bbls : 8.4 mn (10%)

India.. / 1,160 mn. . : 1.5 bbl/yr. : 1.74 bn bbls : 4.8 mn ( 6%)

R.of.W./ 3,461 mn. : 4.35 bbl/yr. :15.07 bn bbls : 41.3 mn (48%)


World. / 6,768 mn.. : 4.6 bbl/yr. : 31.4 bn bbls : 86.0 mn (100%)

Emer.. / 0??? mn. . : ?.? bbl/y.r : x.xx bn bbls : 43.9 mn ( 51%)


Global Oil Reserve : 3.5% pumped : 900 bn bbls


/source, post#8 : http://www.greenenergyinvestors.com/index.php?showtopic=4850


/from, post#xx :


= = = = =





Ethanol News : http://www.ethanolproducer.com/index.jsp

Ethanol Stats : http://www.ethanolrfa.org/industry/statistics/

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ETHANOL Economics




Times are tough for ethanol producers. They are in the same boat right now as refiners - enduring very poor margins. This is what the economics roughly look like at $5 per bushel of corn and $8/MMBTU of natural gas. To produce 1 gallon of ethanol today requires:


(doesn't take into account any return on investment)

$1.85 of corn

$0.33 of energy

$0.14 of enzymes, yeast, etc.

$0.23 of labor, maintenance, and various miscellaneous expenses



There is a DDGS credit per gallon of ethanol of $0.55. Thus, the total cost to produce a gallon of ethanol today is $1.85 + $0.33 + $0.14 + $0.23 - $0.55, or exactly $2/gallon of ethanol. For reference, the February contract for ethanol in the Midwest as of this writing is $2.15. And $2/gallon is merely cost of production.

/see: http://www.theoildrum.com/node/3591



Ethanol - Quick Facts


One acre of corn can produce enough ethanol to run a car for some 72,000 miles on E-10 Unleaded.


For every barrel of ethanol produced, 1.2 barrels of petroleum are displaced.

In 2008, U.S. ethanol production displaced the equivalent of 330,000 barrels of imported crude oil per day—more than one large oil tanker per week.


The use of E-10 Unleaded (10 percent ethanol/90 percent ordinary unleaded gasoline) is approved for use by every major automaker in the world.


One bushel of corn yields about 2.8 gallons of ethanol.


A typical 40 million gallon ethanol plant creates 32 full-time jobs and generates an additional $1.2 million in tax revenue for a community.


Ethanol production results in a net energy gain—producing 67 percent more energy than it takes to grow and process the corn into ethanol.


Ethanol production consumed about 20 percent of the nation’s total corn supply in 2007—some 3.0 billion bushels.


Ethanol production in the U.S. hit a record 6.5 billion gallons in 2007—nearly double the amount produced in 2004.


There are some 7 million “flexible fuel” vehicles on America ’s highways that can run on up to 85 percent ethanol (E85).


/see: http://www.ethanolfacts.com/ETHL2008/page.php?pgID=19



fredschumacher on February 6, 2008 - 8:20pm

Here in Minnesota, most ethanol plants are farmer-owned cooperatives, so the farmer members are benefiting from the higher corn prices. When grain prices drop, then they benefit from higher margins on ethanol. And unlike oil, this money stays local and gets plowed back into the local economy. The 10% ethanol that is in my Minnesota gas mix is going into the local economy, the other 90% leaves. If tight profit margins were a justification for quitting the business, then oil refiners should quit also. Their economics are even worse now than ethanol plants. But don't worry, gas will be $4.00 a gallon this summer, and profitability will return.


Please note that spot prices are not local prices. Local prices are always lower, since cost of shipping to a major port is deducted from the Chicago Board of Trade price. Ethanol plants also contract for grain ahead of time and are not dependent on the spot market.

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Ethanol production




Country Gallons : Barrels


USA...... 6498.6*:

Brazil.... 5019.2 :

E.U. ....... 570.3 :

China...... 486.0 :

Canada... 211.3 :

Other.... xxx


Total... 13,101.7 :


/source: http://ethanol.net/2008/08/24/ethanol-worl...ion-statistics/


*USA...... 6498.6 : maybe: 9,000 in 2008*; 12,000 in 2009

U.S. ethanol plants with a production capacity of 10.2 billion gallons (as of Feb. 2009),

down from 12.5 billion gallons at mid-2008 on plant closures

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Industry: USDA crop report proves farmers can meet food and fuel needs


By Hope Deutscher ... June 30, 2009


Despite projections for near-record corn and record soybean plantings in 2009, total U.S. principal crop acreage declined by 4 million acres, or 1.2 percent, from 2008 levels, according to a USDA National Agricultural Statistics Service crop acreage report released June 30. According to the report, 2009 corn acreage is estimated at 87 million acres*, up 1 percent from last year but 7 percent below 2007. It is the second-largest planted acreage since 1946, behind 2007.


This provides further evidence that U.S. farmers can significantly increase production of feed, food, fiber – and fuel, without needing to expand the nation’s agricultural land base, the Renewable Fuels Association said. "Because there is unused crop capacity in the United States and strong global stocks of agricultural products, it stands to reason that U.S. demand for agricultural products is not forcing land dislocation and indirect land use change in other countries," said RFA President Bob Dinneen.


“The USDA crop report confirms what farmers and renewable fuels producers have known for a long time - the productive capacity of American agriculture is second to none,” said Tom Buis, CEO of Growth Energy. “There have been many critics who have created and spread false fears that we cannot produce enough ethanol to reduce our dependence on foreign oil, without driving up food prices or creating food shortages. As this report confirms, nothing could be further from the truth.”

. . .

"Increased demand for biofuels, such as ethanol, in the U.S. has focused on the potential for land use implications. Critics suggest that biofuels cause significant direct and indirect conversion of land in the U.S. and across the globe. According to the RFA, historical trends indicate that increased U.S. ethanol demand hasn’t significantly driven land use change. In the future, U.S. ethanol production is expected to substantially increase; however, the total amount of agricultural land needed to support that will continue to be immaterial in the context of global agricultural land use. Informa Economics, an agricultural consulting firm, projects that the amount of land in the U.S. required to produce 15 billion gallons of grain ethanol in 2015 will amount to less than 1 percent of world cropland."

. . .

"Producers in the 10 major corn-producing states (Illinois, Indiana, Iowa, Kansas, Minnesota, Missouri, Nebraska, Ohio, South Dakota, and Wisconsin) planted 67.9 million acres of corn in 2009, up 3 percent from last year. The largest increase was recorded in Nebraska where growers planted 600,000 more acres of corn than last year. Other notable increases were shown in Iowa, up 400,000 acres; Missouri, up 300,000 acres; and South Dakota, up 250,000 acres from a year ago. The largest decline occurred in North Dakota where corn planted acreage is down 650,000 acres."


/see: http://www.ethanolproducer.com/article.jsp?article_id=5790


*87 million acres : "Growers expect to harvest 80.1 million acres for grain, up 2 percent from last year. "

One acre of corn can produce enough ethanol to run a car for some 72,000 miles (at ?? mpg??)



By increasing blend levels from 10 to 15 percent, we can create more than 136,000 new green-collar jobs, inject $24.4 billion into the U.S. economy and displace seven billion gallons of imported gasoline each year. We’ll also reduce GHG emissions by another 20 million tons per year n about the same as removing 3.5 million cars from the roads.

/see: http://www.agweekly.com/articles/2009/07/0...nion/opin98.txt

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USGC: U.S. Ethanol Production Grows, Increasing Supply Of Livestock Feed


INDIANAPOLIS, INDIANA, October 20, 2008 ?The U.S. ethanol industry will continue to grow in 2009 creating a substantial increase in the supply of distiller dried grains with solubles (DDGS), a co-product of ethanol. More than 500 attendees at the U.S. Grains Council International Distillers Grains Conference (IDGC) in Indianapolis, Ind., heard that ethanol production increased in 2008 by approximately 3 billion gallons to 9.3 billion gallons compared to last year. Even more critically, production is projected by Informa Economics to reach 11.9 billion gallons in 2009. According to Ken Hobbie, USGC president and CEO, roughly 33 percent of the grain going into U.S. ethanol production will come out as DDGS.


The reason wee holding this conference is that we are confident the U.S. ethanol industry will continue to grow due to efforts undertaken by the National Corn Growers Association and state producer organizations over the last several years,?said Hobbie. ue to the efforts of U.S. growers to establish the ethanol industry, we made DDGS our top priority in 2006 and since then have seen DDGS exports exceed 2 million metric tons annually.?


Bruce Rastetter, CEO of Council member Hawkeye Renewables, told more than 140 international participants to expect growth in ethanol production and a substantial increase in a high quality feed ingredient.


Who would have believed five years ago that the ethanol industry would be largest supplier of energy in this country? That will happen by the conclusion of 2009,?Rastetter said.


Senior Vice President of Informa Economics Scott Richman said as a result of the growth in the U.S. ethanol industry seen this year 22.8 million tons of DDGS were available for global use in 2007/2008 marketing year, nearly a 50 percent increase from the 2006/2007 marketing year. He said the 2008/2009 marketing year, which just began on Oct. 1, will likely experience an additional 50 percent increase in the availability of DDGS, reaching 31.3 million tons.


/more: http://www.cattlenetwork.com/Content.asp?contentid=261796


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Thanks. Excerpt:

Whatever happened to the food crisis? .. Jul 2nd 2009

It crept back


There are two clusters of explanation: cyclical factors—features of the farm cycle and world economy that fluctuate from season to season—and secular, long-term factors. Cyclical influences include re-stocking: cereal stocks were run down as prices spiked and need to be replenished. In 2006 and 2007, stocks fell below 450m tonnes, about 20% of consumption; now they are back up over 520m, or 23%. That is one source of new demand. Another comes from ethanol. As oil prices rise, ethanol starts to be competitive again (as a rule of thumb, ethanol is profitable when petrol costs $3 a gallon in America, a level it has just reached in California). The fall in the dollar and in freight rates has also kept the local-currency costs of importing a tonne of cereals lower than dollar-denominated world prices. This has encouraged many countries to buy more.


Lastly, it is possible that the widespread hunger brought about by soaring prices—the FAO says a billion people will go hungry this year—may have reached a peak and the poor may be back in the market for grain again. This may sound unlikely, as traditionally poor consumers have had little influence over world food prices, but economic growth has continued in the largest emerging markets (notably China and India) and governments in much of the developing world have been expanding aid programmes for the poor, such as conditional cash-transfer schemes. That may be boosting demand; it would explain why prices of grain, which everyone eats, have been rising this year while prices of meat—the food of the rich and aspiring middle classes—have continued to fall.


Snakes in the grass

But the world food crisis of 2007-08 showed that food prices are not influenced solely, or even mainly, by cyclical factors. They soared in large part because of slow, irreversible trends: population growth; urbanisation; shifting appetites from grain to meat in developing countries. There is no sign that these trends are abating.


At the moment, the world’s population is 6.7 billion and 750m people are born each year. Though the rate of increase is declining, inertia means the total will go on rising until 2050, when the population will reach 9 billion. In Ethiopia, for example, 18m children are born every year, rising to 24m a year by 2040. That will double its headcount from 80m to 160m.

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