World Grain - April 2007 - 47

BIOFUELS QUARTERLY: SETTING THE BAR HIGH

lons, representing 7.5% of the gasoline
by volume, in 2012.
The profit margin of corn-based ethanol and soybean-based biodiesel plants is
largely determined by the price of those
feedstocks. Until recently, relatively low
commodity prices coupled with the receipt of federal tax credits has made the
U.S. biofuels industry profitable.
But the recent surge in the price of
corn, driven higher mainly because of
the growing demand in the biofuels sector, is negatively impacting the bottom
line at ethanol plants. Biodiesel facilities are also feeling the pinch, as soybean prices also have trended upward in
recent months.
As ethanol production increases,
competition for corn supplies among

EIA said it expects some cellulosic ethanol production to
come online between 2010
and 2015, with production estimates of 250 million gallons
per year during that period.

the oilmeal crushing industry, available
in large quantities at relatively low prices.
At production levels nearing 300 to 600
million gallons of biodiesel per year (less
than 2% of diesel fuel pool), the marginal
cost of using soybean oil as a feedstock
rises to the point where other oilseeds
- canola, rapeseed, sunflower and cottonseed - become viable feedstocks.

RESOURCE UTILIZATION
EIA said increases in the supply of
corn and soybeans as biofuels feedstocks
will likely come from a combination of
three strategies:
* increasing the amount of land used
as cropland;
* boosting the yields of existing energy crops;

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the fuel, food and export markets, along
with the decline in the marginal value
of ethanol co-products, is expected to
make production more expensive.
Some studies have suggested that up
to 16 billion gallons of ethanol (slightly more than 10% of the total gasoline
pool) can be produced from corn in 2015
without adversely affecting the price of
corn and upsetting domestic food, feed
and export markets. Others disagree
with that assessment.
EIA estimates that between 33% and
38% of domestic corn production would
be needed to produce 12 to 16 billion
gallons of ethanol in 2015, compared
with the 20% that was used for ethanol
feedstocks in 2006.
Likewise, the U.S. biodiesel industry
relies almost exclusively on soybean oil
as a feedstock. EIA noted that soybean oil
has historically been a surplus product of

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World Grain - April 2007

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