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)

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)

($/dry ton)

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 250,000 acres

  Bottomland hardwood trees 500,000 acres   Non-flood plain wetlands 250,000

acres   Flood plain wetlands 500,000

acres   Longleaf pine plantings 250,000 acres   Prairie pot hole dusk habitat 100,000 acres   State acres for wildlife 500,000 acres

Study

Yield Level(s)

Assumed Stand

Lifespan(s) Land Cost Harvest method

Estimated Cost of Production

tons/acre Years $/acre yes/no $/ton

Khanna et al. (2008) 9.4 10 $78

Large rectangular

bales

$44 (farm gate, w/o

land cost) $89

(delivered) Mooney et al. (2009) 6.2 — 7.9 5 and 10 $68 Large round

bales $42-63

(farm gate, 10-year lifespan)

Perrin et al. (2008) 2.6 — 3.5 5 and 10 Various Mixed

$42-71 (farm gate, 10-year

lifespan)

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   Questions are largely CV in orientation because there is really no market yet for these grasses.

  Woody Biomass   other

  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.