T. Randall Fortenbery RENK Agribusiness Institute Wisconsin Bioenergy Initiative Dept. of Ag and Applied Economics

Transcription

1 T. Randall Fortenbery RENK Agribusiness Institute Wisconsin Bioenergy Initiative Dept. of Ag and Applied Economics

2 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

3 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.

4 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)

5 ($/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)

6 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)

7

8 » 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.

9 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%)

10 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?

11 Study Yield Level(s) Assumed Stand Lifespan(s) Land Cost Harvest method Estimated Cost of Production Khanna et al. (2008) Mooney et al. (2009) Perrin et al. (2008) Epplin et al. (2007) tons/acre Years $/acre yes/no $/ton $ and 10 $68 Large rectangular bales Large round bales and 10 Various Mixed NS a NS $60 Wang (2009) NS a NS = Not specified Varied by productivity Large rectangular bales Mixed $44 (farm gate, w/o land cost) $89 (delivered) $42-63 (farm gate, 10-year lifespan) $42-71 (farm gate, 10-year lifespan) $36-52 (farm gate) $49-65 (delivered) $66-77 (delivered)

12 Big survey to 1000s of farmer/landowners (Jan - March, 2011) 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

13 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

14 Multi-Disciplinary Effort to Understand Macro and Micro Impacts of Land Use Change to Support Bioenergy College of Agricultural and Life Sciences (through USDA) Wisconsin Bioenergy Initiative Sungrant, U.S. Department of Energy

15 Determine what land use changes are likely. Quantify the impacts of land use change on environmental services delivered. Examine price and institutional arrangements that will lead to growth in commercial biomass production. Trace out a market supply curve for biomass Use as a template for work in other parts of the country.

16 Four southwestern Wisconsin counties. Using GIS, generate maps of marginal land and identify current landowners. Generate a survey sample that insures various land characteristics are robustly represented (over-sampling for some characteristics). Survey active farmers and land owners that are not currently involved in active land management.

17 The first objective is to develop a matrix of land use change benefits and costs. The second objective is to map out a market supply curve what will be offered at various price levels?

18 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.

19