Farmers' Willingness to Supply Canola and Other Oilseeds for Biofuel Production

Farmers’ Willingness to Supply Canola and Other Oilseeds for Biofuel Production Jason Bergtold Associate Professor Department of Agricultural Economics Kansas State University bergtold@ksu.edu

Purpose and Objectives Purpose: To assess farmers willingness’ to produce canola, rapeseed and other oilseed varieties for bio-jet fuel production in the western U.S. under different market conditions.

Tasks: 1) To assess the probability farmers will adopt different varieties of oilseed crops for bio-jet fuel production.; 2) To examine under what market and contractual conditions farmers will adopt different varieties of oilseed crops for bio-jet fuel production.; and 3) To estimate potential land use for oilseed production in the Western U.S. to grow oilseeds for bio-jet fuel production.

Farmer Survey A

4 page mail survey was sent to 10,000 farmers in 11 states (CA, CO, KS, MT, ND, NE, OK, OR, SD, TX, WA). 970 have responded, giving an approximate response rate of 10%. Working on doing an additional 2-page follow-up to nonrespondents this winter to increase the response rate.

The

purpose of the survey was to assess farmers’ willingness to produce oilseeds in rotation with wheat. In addition, collected information on oilseed production, farmer demographics, farm characteristics, adoption behavior, and perceptions.

The

survey included a set of 4 stated choice questions asking if a farmer would be willing to produce alternative oilseed varieties under different variety characteristics and contract/market attributes.

Survey Region Pacific Northwest Northern Plains Southern Plains

Farmers’ Willingness to Grow Oilseeds For Jet Fuel

Varietal characteristics of oilseeds matter too. These include:  Shatter resistance  Pest tolerance and resistance  Winter Hardiness  Extended Direct Combining Window Farmers are willing to give up net returns to have these attributes in their contracts and oilseed varieties

Probability of Adoption

Important contract attributes are:  Net Returns  Contract length (Shorter/Flexible)  Crop insurance Availability  Cost-Share Assistance  “Act of God” Clause

(Blue - with insurance/ Red - no insurance) 1.5 1 0.5

-30

-20

-10

0

0

10

20

30

40

50

60

Ne t Re turns Above Whe at Production ($)

Southern Plains (Blue - with insurance/ Red - no insurance) Probability of Adoption

Farmers will likely grow oilseeds under contract.

Northern Plains

1.5 1 0.5

-30

-20

-10

0

0

10

20

30

40

50

Ne t Re turns Above Wheat Production ($)

60

Willingness-to-Pay (WTP): Oilseed Characteristics Characteristic

Pacific

Northern Plains

Southern Plains

$6.39** ($2.92)

$4.46** ($1.96)

$4.10*** ($1.49)

and Resistance

$4.41 ($2.85)

$4.22** ($2.11)

$4.89*** ($1.51)

Winter Hardiness

$4.89* ($2.81)

$1.02 ($1.91)

$3.31*** ($1.32)

$7.36*** ($3.05)

$9.73* ($2.32)

$7.68*** ($1.54)

Northwest Shatter Resistance Pest Tolerance

Extended Direct Combine

The WTP estimates here indicate the amount of money a farmer Window would be willing to give up in net returns per acre to have this trait in the crop. *,**,*** significant at the 1%,5% and 10% level.

Estimating Potential Supply



Purpose: To estimate potential land use for oilseed production in the Western U.S. to grow oilseeds for bio-jet fuel production.



Activities: 1. Oilseed Supply Estimation 2. Land-Use Modeling



Project Deliverables: 1. Provide adoption probabilities for supply models as a function of price; contract and market conditions; and variety.

2. Develop information about the acres farmers may be willing to plant to oilseed crops for bio-jet fuel production.

Estimating Potential Supply 

Use the probability models to estimate acreage planted in a given area.



Assumed acreage is determined by: wheat acreage x survey response x adoption probability x (1/3) for a 3-year rotation.



Estimated acreage elasticity with respect to price is 8.27. Meaning a 1% increase in the price of oilseeds under contract, increases the area planted by 8.27%

Acreage Response for Rapeseed in Kansas (Acreage Elasticity = 8.27) $27.00 $26.00

Price per cwt

$25.00 $24.00 $23.00 $22.00 $21.00 $20.00 $19.00 $18.00 $17.00

0

50000

100000

150000

200000

250000

300000

350000

Acres Planted The supply curve takes into account contract and market attributes. Changes in these will shift the supply curve.

Factor affecting Land Use and Adoption Prior

21%.

experience increases the willingness to adopt by

Availability

of a nearby crushing facility increases the willingness to adopt by 18 %.

Farmers The

who are risk averse are 17% less likely to adopt.

mean number of acres for a farmer willing to adopt an oilseed under contract was approximately 160 acres.

This was impacted by farm size, profitability, and land tenure arrangement.