FAPRI projects stable ethanol production, margins through 2024

By Susanne Retka Schill | March 18, 2014

Corn prices are likely to remain around $4 per bushel and soybeans at $10 per bushel over the next decade. Ethanol production will remain flat and corn oil use for biodiesel will continue to grow, according to an analysis released by the Food and Agricultural Policy Research Institute at the University of Missouri, “U.S. Baseline Briefing Book—Projections for Agricultural and Biofuel Markets.”  Corn acres are projected to be stable, showing an average of 90.7 million acres over the decade from 2015 to 2024 compared to an average 89.9 million acres in the past five years. Acreage for 2014/15 is projected at 91.3 million acres.

The figures reported represent the average of 500 alternative outcomes based on different assumptions about the weather, oil prices and other factors, the authors of the report explained. The baseline also incorporates key provisions in the new Farm Bill.

The policy baseline assumes that the U.S. EPA proposal to modify the 2014 renewable fuel standard will be adopted and a similar approach will be used to set biofuel use mandates in subsequent years. “Projected growth in ethanol production over the next several years is limited.”  

With corn ethanol production forecast to remain flat, the section on corn products shows no growth in distillers grains production, with the relative shares of domestic and export markets remaining the same as current levels. The charts also indicate DDGS prices will continue to follow corn prices, with DDGS prices at 107 percent the value of corn in 2014/15, rising slowly each year to reach 115 percent the price of corn by the end of the decade modeled.

Corn oil production is projected to grow from 5.57 billion pounds in 2014/15 to just over 6 billion pounds in the next marketing year and hovering around 7.2 billion pounds through the rest of the decade ahead. Feed use of corn is projected at 1.58 billion pounds in 2014/15 and biodiesel use is projected at 1.07 billion pound. Another 1.85 billion pounds is projected to be used in category for food and other uses. The projections indicate biodiesel use of corn will more than double over the next decade, reaching 2.85 billion pounds by 2023/24, while feed use peaks in 2019/20 at 1.97 billion pounds, declining to 1.73 billion pounds by the end of the decade-long projections. The food and other category declines to 1.5 billion gallons over the period, while exports hover around 1 billion pounds. Corn oil prices are forecast to stay about 110 to 112 percent of the price of soy oil throughout the next decade, with the Chicago price forecast to remain around 38 cents a pound.

In the section on ethanol and biofuel policies, the FAPRI report shows ethanol production growing slowly. “Cellulosic and noncorn ethanol production levels remain an uncertainty,” the report says. The U.S. will remain a net exporter of ethanol through the decade ahead. Ethanol exports are projected to peak at 1 billion gallons in 2014, leveling off at around 800,000 million gallons per year for the rest of the decade ahead. Sugarcane ethanol imports from Brazil are forecast to be level at about 200 million gallons for the next decade, compared to a peak more than twice that in 2012 and just under 400 million gallons in 2013.

Biofuel net returns show modest growth beyond 2014, according to the FAPRI report. “Dry mill ethanol net returns over operating costs decline in 2014, and then remain relatively stable,” the forecast said, showing a 2013 peak of 54 cents per gallon produced, and annual net returns between 25 and 29 cents through the decade ahead.

The report makes a similar analysis of other agriculture sectors as well as projecting food prices, farm income, and more.