Future Supply and Demand of Soybeans
The Center for Agricultural and Rural Development at Iowa State University recently reported results of a major study to determine the impact of corn-based ethanol production would have on U.S. agriculture.  The research team used economic tools and models to examine the anticipated size of the ethanol industry and potential impact of ethanol on agricultural markets.

Such a study requires several assumptions, such as the cost of crude oil will remain above $60/barrel; federal ethanol tax credit ($0.51/gallon) will be added to the energy value of ethanol; a bushel of corn will produce three gallons of ethanol and 17 pounds of distillers dried grains (DDGS); DDGS will be valued at $77.56/ton; and the operating cost of ethanol plants will be $0.52 per gallon.  With these assumptions, the team developed a number of significant findings that may impact agriculture.  Some of the findings that impact soybean growers and users of soybean meal include:

• The U.S. corn-based ethanol industry will continue to expand until the market price of corn reaches $4.05.  The profitability of producing ethanol will limit ethanol industry expansion at this market price of corn.
• For the corn-based ethanol industry to provide 20 percent of the fuel for the domestic transportation system by 2015, 11,103 million bushels of corn will be needed; an estimated increase of 21 percent more acres in corn production will be needed to produce the increase demand for corn.
• The impact on the soybean industry will be the higher corn prices will provide an incentive to plant more corn and expansion of DDGS production will create more competition for soybean meal.
• The economic model indicated a reduction in soybean acreage (75.6 to 59.3 million acres); reduction in soybean use (3,091 to 1,850 million bushels); and reduction in soybean meal use (34.1 to 15.2 million tons) for 2006 and 2015, respectively.  They also predicted a significant reduction in soybean meal prices to better compete with DDGS