T. Randall Fortenbery RENK Agribusiness Institute WBI Dept. of Ag and Applied Economics
Perceived need for a dedicated energy crop to meet U.S. renewable fuel standards
Billion-ton study (Perlack et al., 2005)
Switchgrass selected as a “model” crop
Early research by Oak Ridge National Lab (ORNL)
Began evaluating candidate grass species in the 1980s Multiple locations, trial periods, management practices
Switchgrass found to have most favorable characteristics:
High biomass yields Perennial Low input requirements Non-invasive, native to US
Thus, the final dedicated energy crop may or may not be switchgrass, but will likely share many characteristics
Budgeting challenges:
Perennial growth habit
Must consider establishment, maintenance, harvest, storage Can’t rotate into/out of switchgrass on an annual basis
Delayed yields/revenue
Stand matures 2-4 years following establishment How to handle associated economic opportunity costs?
“Returns” are difficult to model:
Contracts or spot markets? (e.g., fixed or variable price?) Production incentives? (e.g., BCAP) Quality concerns? (e.g., losses during storage) Risks?
Most previous research has focused on the “cost” side, assessing the economic “feasibility” of switchgrass production. More research is needed on the “returns” side, as this will strongly influence farmers’ decisions to adopt such a technology.
Surveyed U.S. Universities and other governmental institutions in 50 states. Identified 24 switchgrass enterprise budgets (yellow) and research articles (orange) for producing switchgrass as a bioenergy feedstock. Red indicates no budget or related article was found.)
Source: English, Grbovic, and Mooney (2010)
($/dry ton)
Note that comparisons may be spurious b/c not all studies included all costs (e.g., storage, transportation, etc.) Source: English, Grbovic, and Mooney (2010)
Note that yields tend to be lower in midwest due to a difference in the varieties planted (i.e., upland vs. lowland) Source: English, Grbovic, and Mooney (2010)
» Enterprise budgets allow farm managers to: ˃ Compare costs & returns of alternative crop or livestock activities ˃ Evaluate technological, resource, and management requirements. » Budgets typically include: ˃ A revenue statement, ˃ Variable costs for a fixed enterprise size (e.g. acre) ˃ Machinery and labor schedule » Returns are interpreted with respect to only those costs considered, and generally do not account for overhead, management or risk. » Activities extending beyond a calendar year and/or whose cost/benefit streams vary require separate budgets for each stage of production.
The budgets reviewed had lots of variability
Yields were specified in some budgets but not in others The time frame evaluated varied from 3 to 25 years. The assumed harvest methods varied widely Some used a single annual budget, others specified separate budgets for establishment / maintenance / harvest Some included costs for reseeding, storage, “shrinkage,” and transportation, but most did not Only one included an opportunity cost for lost revenue in first 2-3 years? Annual herbicide costs varied from $0 to $26. Final cost/ton estimates varied widely, and were unreported in a few.
Do the identified budgets meet the typical definition?
Have revenue statement? 9 of 24 (37%) Have machinery/labor schedule? 10 of 24 (41%) Have separate budget for establishment? 16 of 24 (67%)
Sept. 30 2009
2.8 million acres
Sept. 30, 2010
4.5 million acres
Sept. 30 2011
4.4 million acres
Sept. 30 2012
6.5 million acres
Upland Bird Habitat acres Bottomland hardwood trees Non-flood plain wetlands acres Flood plain wetlands acres Longleaf pine plantings Prairie pot hole dusk habitat State acres for wildlife
250,000 500,000 acres 250,000 500,000 250,000 acres 100,000 acres 500,000 acres
Study
Yield Level(s) Assumed
Stand Lifespan(s)
tons/acre
Years
Land Cost
Harvest method
Estimated Cost of Production
$/acre
yes/no
$/ton $44 (farm gate, w/o land cost) $89 (delivered) $42-63 (farm gate, 10-year lifespan) $42-71 (farm gate, 10-year lifespan)
Khanna et al. (2008)
9.4
10
$78
Large rectangular bales
Mooney et al. (2009)
6.2 — 7.9
5 and 10
$68
Large round bales
Perrin et al. (2008)
2.6 — 3.5
5 and 10
Various
Mixed
Epplin et al. (2007)
NSa
NS
$60
Large rectangular bales
$36-52 (farm gate) $49-65 (delivered)
Wang (2009)
6.0-7.8
NS
Varied by productivity
Mixed
$66-77 (delivered)
a
NS = Not specified
How do potential producers view the opportunities? What are the environmental impacts associated with land use change? What are the social/economic impacts with land use change? What are the public costs associated with land use change? What are the associated benefits of land use change?
Big survey to 1000s of farmer/landowners (Nov – Jan, 2010-11)
Basic farm characteristics Demographics and characteristics of landowner household Main agricultural activities and size of enterprises Other sources of household income Some management practices, land program participation, and environmental stewardship activities and attitudes Land use inventory Farm land
Crop acreage (owned and operated) in 2010, 2009 Type of crops in 2010, 2009 Value per acre of land (if rented out what would you charge?)
Pasture
Improved pasture Other pasture
CRP land Woods Wetlands Other types General spatial characteristics of land Continguous land? Furthest distance from main parcel to other parcels Sloped land, poorly drained, (%) in crops. Willingness to participate questions on various types of land and biomass sources Keep in mind the spectrum of potential management decisions
Modifying management of prime agricultural lands Intensify agricultural production on marginal lands Decrease intensity of production on marginal lands
Corn stover on Prime land or Marginal Land –
How much is corn stover worth on land? Scenario on costs of removal and pay price? Does it matter if the stover is a biofuel?
Grasses
Woody Biomass other
Questions are largely CV in orientation because there is really no market yet for these grasses.
Multi-Disciplinary Effort to Understand Macro Impacts of Land Use Change to Support Bioenergy
Wisconsin Department of Natural Resources College of Agricultural and Life Sciences (through USDA) Wisconsin Bioenergy Initiative Sungrant, U.S. Department of Energy
If we are to meet the RFS as currently envisioned, we will need to think beyond “more” productive use of fringe areas, and consider other land use changes. To fully appreciate the social impact of changes, more complete data is needed. We are initiating a more formal, complete assessment of landscape impacts by viewing Southwest Wisconsin as a laboratory.