own estimates Is the Ethanol bubble about to burst? Is the Ethanol bubble about to burst?<br><br> No No , but it is , but it is facing some facing some growing pains growing pains Nearby Futures Prices of Ethanol and Reformulated Gasoline Blendstock, Daily 2006- 2007 1.00 1.50 2.00 2.50 3.00 3.50 4.00 4.50 1/6/2006 5/6/2006 9/6/2006 1/6/2007 5/6/2007 9/6/2007 Date Price ($/gallon) Ethanol Gasoline Blendstock Ethanol Gross Margin based on Futures Prices, April 2005 3 January 2008 Gross Value of Ethanol and Distiller's Grain Per Bushel of Corn, Weekly Nebraska, Feb 2007 - Feb 2008 0.00 1.00 2.00 3.00 4.00 5.00 6.00 7.00 8.00 9.00 2/23/07 3/23/07 4/23/07 5/23/07 6/23/07 7/23/07 8/23/07 9/23/07 10/23/0711/23/0712/23/07 1/23/08 Week Gross Value ($/bushel of Corn) Distiller's Grain Value Ethanol Value Distiller's Grain + Ethanol Value Source: Livestock Marketing Information Center Corn Price Estimated Gross Margin of Ethanol Distiller's Per Bushel of Corn, Weekly Nebraska, Feb 2007 - Feb 2008 1.00 1.50 2.00 2.50 3.00 3.50 4.00 4.50 2/23/07 3/23/07 4/23/07 5/23/07 6/23/07 7/23/07 8/23/07 9/23/07 10/23/0711/23/0712/23/07 1/23/08 Week Gross Value ($/bushel of Corn) Source: Livestock Marketing Information Center Ethanol Biorefinery Stock Prices, Weekly Jan 2006 - Feb 15, 2008 0 5 10 15 20 25 30 35 40 45 50 1/3/2006 4/3/2006 7/3/2006 10/3/2006 1/3/2007 4/3/2007 7/3/2007 10/3/2007 1/3/2008 Week Share Price ($/share) Green Plains Renewable Energy Pacific Ethanol US Bioenergy Verasun Energy Source: Yahoo Finance US President George Bush State of Union Address Jan. 23, 2007 cTo reach this goal, we must increase the supply of alternative fuels, by setting a mandatory fuels standard to require 35 billion gallons of renewable and alternative fuels in 2017 -- and that is nearly five times the current target. d Renewable Fuels Standard, Ethanol Production, 2006-2015 0 2 4 6 8 10 12 14 16 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 Year Renwable Fuels (bln. gal.) Previous Standards Ehtanol Production New Standards (renewable biofuel) Implications for High Plains Cattle Feeding 1.<br><br> 1. Higher grain prices Higher grain prices 2. 2.<br><br> Greater grain price volatility Greater grain price volatility 3. 3. Stronger grain price basis & variability Stronger grain price basis & variability 4.<br><br> 4. Cattle on high energy feed less time Cattle on high energy feed less time 5. 5.<br><br> Regional shift of cattle to bio Regional shift of cattle to bio - - refineries refineries 6. 6. Intense competition for trucks Intense competition for trucks National Average Corn Price vs.<br><br> Ending Stocks to Use Ratio, 1995/96- 2009/10 0.00 0.50 1.00 1.50 2.00 2.50 3.00 3.50 1995/96 1998/99 2001/02 2004/05 2007/08 Crop Year Price ($/bu) 0 0.05 0.1 0.15 0.2 0.25 Stock to Use Ratio Source: USDA Corn price Stock to use ratio Corn is more expensive National Average Corn Price vs. Ending Stocks to Use Ratio, 1995/96 - 2009/10 1.50 1.70 1.90 2.10 2.30 2.50 2.70 2.90 3.10 3.30 3.50 0 0.05 0.1 0.15 0.2 0.25 Ending Stocks to Total Use Ratio Corn Price ($/bu) '95/'96 '09/'10 '08/'09 '07/'08 Source: USDA Corn is more expensive Will we plant our way out of this? Futures Prices February 15, 2008 Corn CBOT DEC 908 $5.38/bu DEC 909 $5.08/bu DEC 910 $5.02/bu Soybeans CBOT NOV 908 $13.17/bu NOV 909 $12.52/bu NOV 910 $12.49/bu Hard Red Wheat KCBT JUL 908 $10.16/bu JUL 909 $8.75/bu Is releasing CRP the answer?<br><br> CRP Acres by State (Top Ten States), 2008 0 500,000 1,000,000 1,500,000 2,000,000 2,500,000 3,000,000 3,500,000 4,000,000 4,500,000 TX MT KS ND CO IA MN WA MO SD State Acres 68.5% of 34.6 mln acres Annualized Implied Volatility, Corn Option Market, 1990-2007 0 5 10 15 20 25 30 35 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007* Year Implied Volatility (%) Source: CBOT, *2007 through Nov. Corn Price is more variable & insurance more expensive 62% increase in Price of an option Corn price more expensive than NE and volatile price differences Cash Corn Price Difference: Garden City minus Omaha, Weekly Jan 2001 - Feb 2008 0.00 0.10 0.20 0.30 0.40 0.50 0.60 1/4/2001 1/4/2002 1/4/2003 1/4/2004 1/4/2005 1/4/2006 1/4/2007 1/4/2008 Week Garden City - Omaha ($/bu) Weekly Garden City and Omaha Nearby Corn Basis, Jan 2001 - Jan 2008 -0.60 -0.50 -0.40 -0.30 -0.20 -0.10 0.00 0.10 0.20 0.30 0.40 1/4/2001 1/4/2003 1/4/2005 1/4/2007 Week Basis ($/bu) Garden City Omaha Distiller 9s grain is more expensive in KS Kansas minus Iowa Distiller's Grain Price, Weekly Jan 2006 - Feb 2008 -10.00 -5.00 0.00 5.00 10.00 15.00 20.00 25.00 30.00 35.00 1/31/2006 5/31/2006 9/30/2006 1/31/2007 5/31/2007 9/30/2007 1/31/2008 Date Price Difference ($/ton) Source: USDA Corn is a poor cross hedge for DG price risk Garden City Corn and Kansas Distillers Grain Prices, Weekly 2006-Jan 2008 1.50 2.00 2.50 3.00 3.50 4.00 4.50 5.00 5.50 01/03/06 07/04/06 01/02/07 07/03/07 01/01/08 Week Corn Price ($/bu) 60.00 80.00 100.00 120.00 140.00 160.00 180.00 200.00 DG Price ($/ton) Distiller's Grain Corn Price Kansas Distillers Grain and Garden City Corn Price, Weekly January 2006-Nov 2007 60.00 70.00 80.00 90.00 100.00 110.00 120.00 130.00 140.00 150.00 160.00 2.00 2.50 3.00 3.50 4.00 4.50 5.00 Corn Price ($/bu) Distiller's Price ($/ton) Source: USDA $40/ton basis variation Corn is a poor cross hedge for DG price risk Truck freight with ethanol production to almost double 2002 to 2020. Driver shortages projected to reach 219,000 by 2020.<br><br> Ethanol Transportation Backgrounder, USDA, Sept. 2007 Implications for High Plains Cattle Feeding 1. 1.<br><br> Higher grain prices Higher grain prices 2. 2. Greater grain price volatility Greater grain price volatility 3.<br><br> 3. Stronger grain price basis & variability Stronger grain price basis & variability 4. 4.<br><br> Cattle on high energy feed less time Cattle on high energy feed less time 5. 5. Regional shift of cattle to bio Regional shift of cattle to bio - - refineries refineries 6.<br><br> 6. Intense competition for trucks Intense competition for trucks

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