UI prof: Ethanol boom over; biodiesel ramping up

UI prof: Ethanol boom over; biodiesel ramping up

CHAMPAIGN — A University of Illinois professor says the ethanol boom is over, but farmers may soon enjoy the benefits of a boom in biodiesel.

Scott Irwin, a professor of agricultural and consumer economics, said the U.S. will likely need to boost production of biodiesel sharply in order to meet Environmental Protection Agency mandates.

That could prove a windfall for soybean farmers since soy oil accounts for a large amount of the feedstock for biodiesel.

Speaking to about 200 farmers at the Illinois Farm Economics Summit in Champaign on Monday, Irwin said the EPA's renewable-fuel standards call for minimum volumes of cellulosic biofuels to be consumed.

But development of the cellulosic biofuel industry has been slow, and Irwin said the EPA could well turn to another advanced biofuel — biodiesel — to plug that gap.

Irwin said renewable-fuel standards spell out minimum consumption levels for four types of biofuels through the year 2022.

One type is renewable biofuels, which includes corn-based ethanol. The other three types — considered "advanced" biofuels — include:

— Cellulosic biofuels, made from materials such as miscanthus and switchgrass.

— Biodiesel, made from materials such as soybean and canola oils.

— Undifferentiated biofuels, such as sugar cane ethanol from Brazil.

In other presentations:

Corn, soybean prices expected to moderate. UI Professor Emeritus Darrel Good said he projects corn and soybean prices will drop in 2013 as production of those crops rebounds.

He said the average corn price for the 2013-14 marketing year could be $4.75 to $5.50 a bushel, down from a 2012-13 marketing year average that's expected to top $7 a bushel.

Good said he expects the average price of soybeans during the 2013-14 marketing year to be between $11 and $12 a bushel, down from this year's expected average of $14.50 a bushel.

The projected drop in corn prices assumes higher production, both in the U.S. and Argentina. Good said he anticipates a "very large" U.S. crop, perhaps exceeding 14 billion bushels.

Soybean production, both domestic and worldwide, is also expected to rise next year, he added. While the U.S. corn crop could set a record, Good said, he expects the U.S. soybean crop to be "big, but not monster."

Farm income expected to remain high. Net farm income for grain farms is likely to exceed expectations this year and remain high in 2013, according to Gary Schnitkey, a UI professor of agricultural and consumer economics.

Farm income was relatively high this year despite drought-related yield losses. Schnitkey credited that to two factors: higher corn and soybean prices and crop insurance payments.

But not everyone fared well. Farmers who didn't have crop insurance and did a lot of hedging last spring were likely to face losses, he said.

"We're looking for 2013 to be a fairly good year," Schnitkey said.

Farm income next year could exceed average income levels for the years 2009 to 2012, he said. Those projections are based on futures contract prices, stable production costs and yields in line with historic trends.

Farm bill prospects murky. Nick Paulson, an assistant professor of agricultural and consumer economics at the UI, outlined a couple possible scenarios for a farm bill in Washington this year.

Either the current farm bill could be extended for three months or a year, or the farm bill could be added to other legislation, perhaps as a result of "fiscal cliff" negotiations, he said.

Paulson said he thinks it's too late in the year for the full House to vote on the House Agriculture Committee's bill or for the House and Senate proposals to be referred to conference committee.

Whatever legislation emerges is likely to put more emphasis on crop insurance as a safety net and less emphasis on income-support measures, he said.

Both the House and Senate proposals would make cuts to commodity, nutrition and conservation programs in varying degrees, he said.

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