Academic journal article Journal of Agricultural and Applied Economics

Assessment of Alternative Fuel Production from Switchgrass: An Example from Arkansas

Academic journal article Journal of Agricultural and Applied Economics

Assessment of Alternative Fuel Production from Switchgrass: An Example from Arkansas

Article excerpt

As the hunt for renewable energy sources from agriculture intensifies, many agricultural producers are contemplating what crops to grow in the foreseeable future. On the one hand, there are traditional food crops, such as soybean, corn, and wheat, which have recently enjoyed a spike in prices, primarily because of the seemingly ever-growing demands of the corn to ethanol industry. On the other hand, there are the lesser-known perennial energy crops, such as switchgrass. Although much information on various aspects of switchgrass production exists, this paper discusses the adaptation of existing production and processing information to Arkansas conditions as a potential alternative to crop production.

Key Words: biofuels, production costs, switchgrass

JEL Classifications: Q42

As energy prices increased, so did the viability of energy production from renewable resources. Although much attention has been paid to the recent surge in corn prices as a direct result of expanding corn to ethanol production (close to $4 per bushel at the time of this writing), this change in commodity prices had implications for other commodities as well (nearly $7 and $4 per bushel for soybean and wheat, respectively). These prices represent 83%, 21%, and 32% increases compared to 1996-2005 average Arkansas prices of $2.18, $5.80, and $3.03 per bushel for corn, soybean, and wheat, respectively (U.S. Department of Agriculture, National Agricultural Statistics Service). With this surge in commodity prices, however, the attractiveness of growing alternative crops for energy production was also affected. Hence, although a lot of reports highlight the potential for both agricultural and forestry residue along with the potential for dedicated herbaceous and woody energy crops, many questions relating to the eventual adoption of these alternative sources of renewable energy remain.

At the society level, laudable attributes of lignocellulosic biomass (LCB) conversion to biofuels (primarily ethanol) as the pathway toward greater fossil fuel independence have been identified. Principally, they are as follows: i) the current underutilization of biomass as a source of energy; ii) higher net energy ratios (the amount of fossil energy equivalent produced compared with the amount required in its production) than currently attributed to corn to ethanol production; iii) the fit with liquid and storable fuel demand rather than generation of electricity or heat; iv) a more environmentally defensible carbon life cycle; v) the potential for soil and water quality improvements because of increased organic matter, reduced irrigation, and fertilizer requirements as well as runoff; vi) the potential for rural economic development; and vii) the production of few by-products compared with other processes, such as corn to ethanol or soybean to biodiesel.

At the producer level, the benefits of alternative energy crop production are not as evident. Higher commodity prices, as mentioned above, were needed to offset increases in production costs, such as fuel and fertilizer. Increased feed costs have hurt the livestock sector at the same time. In addition, with growing proportions of corn and soybean oil being devoted to ethanol and biodiesel production, agriculture is developing stronger links to energy prices by adding output price risk to existing dependence on variable input prices. Thus, expected variability in crude oil prices is also expected to further increase volatility in commodity prices and uncertainty about crop acreage allocation decisions. Producers may therefore be willing to entertain long-term supply contracts with biorefmeries for energy crops that are less input-intensive on at least some of their acreage. The prenegotiated price to charge for this activity is the contention of this paper.

Although an ever-growing body of literature on energy production from renewable sources exists, it is difficult to provide definitive answers to storage, handling, and logistics questions associated with harvest and transport of low-value, low-density biomass commodities. …

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