Bio-energy profit margins expected to decrease.

Bio-energy profit margins expected to decrease--Profit margins in bio-energy are expected to deteriorate beginning in 2007 as the result of high feedstock prices and progressive elimination of unmet demand, following a large expansion in capacity in renewable fuels, according to the 2007 agricultural outlook presented to the U.S. Congress by the Food and Agricultural Policy Research Institute (FAPRI). Following the large price increase for ethanol in 2006, FAPRI expects the world ethanol price to fall to $1.50/gallon in 2007, in response to a 2.4 percent decline in the price of crude oil and a decline in U.S. ethanol net imports. Projections show the ethanol price continuing to fall throughout the decade, dropping to $1.35/gallon by 2016 as production growth outpaces growth in consumption. Global net trade is projected to increase by 26.4 percent over the decade, approaching 1.3 billion gallons by 2016. FAPRI, an economic research group with centers at Iowa State University and the University of Missouri-Columbia, prepares a set of 10-year projections for U.S. and international commodity markets and presents the results to Congress early each year.