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2012 was a challenging year for renewable fuels

Market Outlook for 2013 and Beyond Iowa Renewable Fuels Summit January 30, 2013 John M. Urbanchuk Technical Director – Environmental Economics. 2012 was a challenging year for renewable fuels. A weak economy and high prices resulted in a decline in motor gasoline demand;

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2012 was a challenging year for renewable fuels

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  1. Market Outlook for 2013 and BeyondIowa Renewable Fuels SummitJanuary 30, 2013John M. UrbanchukTechnical Director – Environmental Economics

  2. 2012 was a challenging year for renewable fuels • A weak economy and high prices resulted in a decline in motor gasoline demand; • The ethanol industry ran up against the E10 blend wall; • Soaring feedstock prices caused by the severe 2012 drought eroded profitability; • Lack of the blenders’ tax credit and poor profitability held the biodiesel industry back.  2

  3. 2013 also promises to be challenging • Will corn and soybean yields recover, produce more normal production levels, allow stocks to rebuild; feedstock prices to moderate; and enable a return to profitability? • Will economic growth accelerate and support increased consumer spending and fuel consumption? • Will the ethanol industry aggressively move to exploit E15 and higher blends? • Can the industry continue to successfully defend the RFS2? • Will the biodiesel and cellulosic biofuel producer tax credit be extended again for 2014?

  4. 2012 drought was most severe since 1995. • Recent yield declines • 1974 -21.2% • 1980 -16.9% • 1983 -18,4% • 1988 -29.4% • 1993 -23.4% • 1995 -18.1% • 2012 -16.8%

  5. “Normal” yields this year will improve the feedstock outlook JMU Jan 2013

  6. Biggest challenge facing renewable fuels industry will be demand! JMU Jan 2013

  7. In conclusion … No matter how you slice it, it’s going to be an interesting year!

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