production

The Energy Independence and Security Act (EISA) of 2007 established specific targets for the production of biofuel in the United States. Until advanced technologies become commercially viable, meeting these targets will increase demand for traditional agricultural commodities used to produce ethanol, resulting in land-use, production, and price changes throughout the farm sector. This report summarizes the estimated effects of meeting the EISA targets for 2015 on regional agricultural production and the environment. Meeting EISA targets for ethanol production is estimated to expand U.S. cropped acreage by nearly 5 million acres by 2015, an increase of 1.6 percent over what would otherwise be expected. Much of the growth comes from corn acreage, which increases by 3.5 percent over baseline projections. Water quality and soil carbon will also be affected, in some cases by greater percentages than suggested by changes in the amount of cropped land. The economic and environmental implications of displacing a portion of corn ethanol production with ethanol produced from crop residues are also estimated.

This paper introduces a spatial bioeconomic model for study of potential cellulosic biomass supply at regional scale. By modeling the profitability of alternative crop production practices, it captures the opportunity cost of replacing current crops by cellulosic biomass crops. The model draws upon biophysical crop input-output coefficients, price and cost data, and spatial transportation costs in the context of profit maximization theory. Yields are simulated using temperature, precipitation and soil quality data with various commercial crops and potential new cellulosic biomass crops. Three types of alternative crop management scenarios are simulated by varying crop rotation, fertilization and tillage. The cost of transporting biomass to a specific demand location is obtained using road distances and bulk shipping costs from geographic information systems. The spatial mathematical programming model predicts the supply of biomass and implied environmental consequences for a landscape managed by representative, profit maximizing farmers. The model was applied and validated for simulation of cellulosic biomass supply in a 9-county region of southern Michigan. Results for 74 cropping systems simulated across 39 sub-watersheds show that crop residues are the first types of biomass to be supplied. Corn stover and wheat straw supply start at $21/Mg and $27/Mg delivered prices. Perennial bioenergy crops become profitable to produce when the delivered biomass price reaches $46/Mg for switchgrass, $118/Mg for grass mixes and $154/Mg for Miscanthus giganteus. The predicted effect of the USDA Biomass Conversion Assistance Program is to sharply reduce the minimum biomass price at which miscanthus would become profitable to supply. Compared to conventional crop production practices in the area, the EPIC-simulated environmental outcomes with crop residue removal include increased greenhouse gas emissions and reduced water quality through increased nutrient loss. By contrast, perennial cellulosic biomass crops reduced greenhouse gas emissions and improved water quality compared to current commercial cropping systems.

Agricultural markets often feature significant transport costs and spatially distributed production and processing which causes spatial imperfect competition. Spatial economics considers the firms’ decisions regarding location and spatial price strategy separately, usually on the demand side, and under restrictive assumptions. Therefore, alternative approaches are needed to explain, e.g., the location of new ethanol plants in the U.S. at peripheral as well as at central locations and the observation of different spatial price strategies in the market. We use an agent-based simulation model to analyze location and spatial pricing in a general model under multi-firm competition, two-dimensional space, and a continuum of potential price strategies. The results show, e.g., that depending on the location of a processor, different price strategies can be observed, spatial price discrimination can increase with the number of competitors, and elasticity in the producers’ supply functions can be identified as stabilizing factor of processor’s location.

This article addresses development of the Illinois ethanol industry through the period 2007-2022, responding to the ethanol production mandates of the Renewable Fuel Standard by the U.S. Environmental Protection Agency. The planning for corn-based and cellulosic ethanol production requires integrated decisions on transportation, plant location, and capacity. The objective is to minimize the total system costs for transportation and processing of biomass, transportation of ethanol from refineries to the blending terminals and demand destinations, capital investment in refineries, and by-product credits. A multi-year transshipment and facility location model is presented to determine the optimal size and time to build each plant in the system, the amount of raw material processed by individual plants, and the distribution of bioenergy crops and ethanol.

This paper examines the impact of declining energy prices on biofuels production and use and its implications to agricultural commodity markets. It uses PEATSim, a dynamic partial equilibrium, multi-commodity, multi-country global trade model of the agriculture sector to analyze the interaction between biofuel, crop and livestock sectors. The ability of countries to achieve their energy goals will be affected by future direction of petroleum prices. A 50 percent decline in petroleum prices (absent of mandates) would result in rapid decline in biofuel use worldwide accompanied by a decline in feedstock and biofuel prices. About a 21 percent decline in U.S. cost of ethanol production is needed to make ethanol competitive with gasoline and to offset the effect of lower energy prices.

USDA Agricultural Projections for 2011-20, released in February 2011, provide longrun projections for the farm sector for the next 10 years. These annual projections cover agricultural commodities, agricultural trade, and aggregate indicators of the sector, such as farm income and food prices.

Important assumptions for the projections include:

* U.S. and world economic growth move back toward longrun steady increases in the aftermath of the global financial crisis and economic recession.
* Although global population gains continue to slow, growth in most developing countries remains above that in the rest of the world.
* Population gains in developing countries, along with higher incomes, increased urbanization, and expansion of the middle class, are particularly important for growth in global food demand.
* Continued expansion of biofuels further adds to world demand for agricultural products.

Key results in the projections include:

* Recent price increases for many farm commodities underlie record projected levels of U.S. agricultural exports and U.S. net farm income in 2011.
* Prices for major crops decrease in the early years of the projections as global production responds to current high prices.
* World economic growth and demand for biofuels combine to support longer run increases in consumption, trade, and prices for agricultural products.
* Thus, following the near-term declines, prices for corn, wheat, oilseeds, and many other crops remain historically high.
* After near-term reductions from projected 2011 records, the value of U.S. agricultural exports and net farm income each rise through the rest of the decade.

Energy security and environmental concerns about global climate change have lead to recent growth in the use of bio-fuels in the U.S. Brazil currently exports a substantial share of its sugarcane based ethanol to the U.S. to support the growing demand for bio-fuels. However, U.S. policies that exogenously affect the bio-fuel sector confound the understanding of the multi-market impacts of a growing bio-fuel demand. Moreover, the various forms of government intervention in the bio-fuel economy leave researchers with unclear conclusions about the prospects for bio-fuels. The indirect effects on related agricultural markets from increased bio-fuels consumption and the subsequent land use changes driven by expanded feedstock production also require more attention. To improve the understanding of these issues, we examine the market implications in the international ethanol sector by analyzing the equilibrium effects of bio-fuels policies. Additionally, we investigate land use change implications of an expanding Brazilian ethanol sector. In particular, the potential for livestock intensification of Brazilian pasture land grazing systems is considered as a prospective pathway for releasing new land for expanding sugarcane cultivation. We consider the related trade-offs in the Brazilian agricultural sector and their implications for trade with the U.S.

In the corn ethanol industry, the ability of plants to obtain favorable prices through marketing decisions is considered important for their overall economic performance. Based on a panel of surveyed of ethanol plants we extend data envelopment analysis (DEA) to decompose the economic efficiency of plants into conventional sources (technical and allocative efficiency) and a new component we call marketing efficiency. The latter measure allows us to evaluate plants’ ability to contract favorable prices of corn and ethanol relative to spot market prices and its implications for their overall economic performance. Results show that plants are very efficient from a technical point of view. Dispersion in overall economic performance observed across units is mainly explained by differences in allocative and marketing sources. Our results are consistent with the view that plants with higher production volumes may perform better, in part, because they can secure more favorable prices through improved marketing performance. Plants also seem to achieve significant improvements in marketing performance through experience and learning-by-doing. These results are consistent with two facts; 1) economies of scale may not be the only reason behind the increase in the average size of plants in the ethanol industry and; 2) there might be incentives for horizontal consolidation across plants.

FAOSTAT provides time-series and cross sectional data relating to food and agriculture for some 200 countries.

The national version of FAOSTAT, CountrySTAT, is being developed and implemented in a number of target countries, primarily in sub-saharan Africa. It will offer a two-way data exchange facility between countries and FAO as well as a facility to store data at the national and sub-national levels.

A system of equations representing corn supply, feed demand, export demand, food, alcohol and industrial (FAI) demand, and corn price is estimated by three-stage least squares. A price dependent reduced form equation is then formed to investigate the effect of ethanol production on the national average corn price. The elasticity of corn price with respect to ethanol production is then obtained. Results suggest that ethanol production has a positive impact on the national corn price and that the demand from FAI has a greater impact on the corn price than other demand categories. Thus, significant growth in ethanol production is important in explaining corn price determination.