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Key Themes

Future of American Grain Exports in the Age of Renewable Fuels (and other “Environmental Services”) July 9, 2013 PRX • Bill Hudson. The American cornbelt has long had tens of millions of “(exportable) surplus acres” which when planted would produce enormous carryovers and low crop prices;

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Key Themes

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  1. Future of American Grain Exports in the Age of Renewable Fuels(and other “Environmental Services”)July 9, 2013PRX • Bill Hudson

  2. The American cornbelt has long had tens of millions of “(exportable) surplus acres” which when planted would produce enormous carryovers and low crop prices; In the past, when export demand was weak, Congress offered these surplus acres federal programs (set-asides, paid diversions, conservation reserves, etc.) but the acres were eligible to return to production with high prices (as by poor weather or increased export demand); With the Energy Acts of 2005 and 2007, however, Congress essentially dedicated the cornbelt’s entire surplus acreage to “Renewable Fuel” with mandatory annual volumes independent of weather and world crop prices, and which may be waived only in the event of “severe economic harm”; Congress specified increasing volumes of Conventional Renewable Fuel (mainly corn), with a maximum of 15 billion gallons in 2015 (about 4 billion bushels, allowing for DDG feeding); Thus the future of the cornbelt’s “(exportable) surplus” now depends on • Energy prices ••• Corn yield trend and annual volatility •• Strength of China’s soybean imports and of finished meat (demand for cornbelt area!) • Price competition from other world Export Hubs •• Reaching the 15 billion gallons of Renewable Fuel (or perhaps somewhat less?) • Net income of the US Corn-Soybean Sector (farmer interest in alternatives) •• The potential addition of other required “Environmental Services” on agricultural lands by the US government, independent of the prevailing market price of energy. Key Themes

  3. The long-term pattern of El Nino/La Nina • is sometimes correlated with yield, • but many times NOT, • and El Nino/La Nina cannot itself be predicted • it is “chaotic,” • It requires an average “ensemble” of guesses 6-23-13

  4. No one can forecast the temperature of the atmosphere, NO ONE!

  5. It is UNKNOWN what, in some years, causes the western dry-heat bubble to move eastward over the cornbelt • The previous spaghetti chart means • the UNIPCC models are wrong, yes, • but NOT that observed global warming • will never return, • has (only) natural causes, or • has no relationship to recent extreme events.

  6. Result of $1.05/gal RINs, 3-11-13 • Problem is that only about 2500 stations of the country’s 170,000 offers E-85, and only 6 to 12 offer E-15. • For the official view on why expansion of E-85/E-15 is virtually impossible, see recent Congressional Research Report. (DOE says the same.) • But D6 RIN price has just now begun to make the economics viable. And what choice do refiners & blenders have? Maybe a little more biodiesel? • Let’s wait and see a little longer. PRX is sticking with its 50-50 forecast that the rollover RINs will prolong compliance long enough for more E85/E-15 in 2014.

  7. Evidence in Past Six Months of an“Expanding Federal Plan for American Biofuels Agriculture”

  8. So, Congress is not completely stupid?! ?

  9. Future of US Environmental Services beyond RFS

  10. Quick Summary of Two Conjoined Political Episodes: United States and China

  11. Compliance Crisis 2014?An immediate question for Red Team is, “What happens when surplus D6 RINs are used up? More E15/E85 blended, more biodiesel, and/or less total MoGas made available domestically? See EIA Administrator Adam Sieminski’s clear and forceful testimony to House Energy Committee on Jun-26-2013, defending the EIA forecast at: http://docs.house.gov/meetings/IF/IF03/20130626/101042/HHRG-113-IF03-Wstate-SieminskiA-20130626-U1.pdf Progress report on Red Team Project at PRX Summer Seminar in KC, August 19-20, 2013

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