Oilseed Workshop Wichita Falls Texas December 11 2008

Oilseed Workshop Wichita Falls, Texas December 11, 2008 Mark Welch Texas Agri. Life Extension Service Texas A&M University System

Conclusion § Vegetable oilseed prices are strong due to growing demand § Food § Fuel § Demand growth tied to Pumping ethanol from corn in 1933 § Population & income § Biofuel mandates § Environmental friendliness § Food versus fuel debate

World Vegetable Oil Use Million lbs. 46% 40% 38% % of supply used for fuel

Biodiesel Mandates 500 million gallons in 2009 1 billion gallons by 2012 Rapeseed Soybean Oil All diesel sold must contain minimum 5% biodiesel by 2010 Soybean Oil 10% of energy used for transport must be biofuel by 2020

2007 U. S. Biofuel Mandates Billion gallons Source: FAPRI and RFA

NEB of corn grain ethanol and soybean biodiesel production Hill J. et. al. PNAS 2006; 103: 11206 -11210 © 2006 by National Academy of Sciences

World Biodiesel Production and Capacity MT/yr

Global Economic Growth

World Per Capita Vegetable Oil Use kg Palm, soybean, rapeseed and canola, and sunflowerseed

World Oilseed Harvested Area Million acres Source: USDA, PS&D

World Soybean Oil S&D 000 MT Source: USDA, PS&D Stocks: Use

World Rapeseed Oil S&D 000 MT Source: USDA, PS&D Stocks: Use

World Sunflowerseed Oil S&D 000 MT Source: USDA, PS&D Stocks: Use

Value of Soybean Oil and Soybean Meal per bushel $ 45% 42% 30%

Value of Canola Oil and Canola Meal per cwt $ 71% 68% 54%

Value of Sunflower Oil and Sunflower Meal per cwt $ 90% 88% 75%

Oil Prices ¢/lb Source: FAPRI and USDA $/gal

U. S. Vegetable Oil Consumption, excluding biodiesel Lbs.

U. S. Biodiesel Production Million gallons

U. S. Planted Acres million

U. S. Soy Oil Use Million lbs. 7. 7% 1. 1% 1. 5% 9. 9% 9. 3% 10. 2% % of soy acres used for biodiesel

Biodiesel Returns

Which Way Do You Turn? Conventional Alternative

Alternative Crops Production Marketing • • • Price Crop Rotations Varieties Pesticides Special Equipment Storage/Processing/ Transportation • Services • Contracted Level of Production • Yield Expectations – – • • • Open market Contract specific Base plus Premiums and Discounts When is payment made? Crop Insurance Safety Net Services Firm’s Reputation

Mark Welch, Economist—Grain Marketing JMWelch@ag. tamu. edu (979)845 -8011 • Alternative crops involve additional risks and opportunities • Diversity of production may provide income as well as agronomic benefits • Active effort is required to evaluate the complete “merchandise package” http: //agecoext. tamu. edu/index. html

Price Correlations $/gal ¢/lb s o y o i l d i e s e l $/gal Heating oil $/gal Diesel

Price Correlations 70 100 R 2 = 0. 8996 = 0. 9737 90 60 c a n o l a s 80 u 70 n 60 f l 50 o 40 w 30 e r 20 50 40 30 20 10 10 0 0. 00 10. 00 20. 00 30. 00 40. 00 50. 00 60. 00 Soybean Oil Price/lb.