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The objective of this paper is to systematically assess the cropland acreage that could support energy crops and the expected farmgate and delivered prices of energy crops. The assessment is based on output from two modeling approaches: (1) the Oak Ridge County-Level Energy Crop (ORECCL) database (1996 version) and (2) the Oak Ridge Integrated Bioenergy Analysis System (ORIBAS). The former provides county-level estimates of suitable acres, yields, and farmgate prices of energy crops (switchgrass, hybrid poplar, willow) for all fifty states. The latter estimates delivered feedstock prices and quantities within a state at a fine resolution (1 km2) and considers the interplay between transportation costs, farmgate prices, cropland density, and facility demand. It can be used to look at any type of feedstock given the appropriate input parameters. For the purposes of this assessment, ORIBAS has been used to estimate farmgate and delivered switchgrass prices in 11 states (AL, FL, GA, IA, MN, MO, ND, NE, SC, SD, and TN). Because the potential for energy crop production can be considered from several perspectives, and is evolving as policies, economics and our basic understanding of energy crop yields and production costs change, this assessment should be viewed as a snapshot in time.
Both modeling approaches are based on current cropland use patterns (1992 Agricultural Census) and recent (1996) estimates of likely energy crop yields in the year 2000. Only acreage that is currently supporting crop production is considered—land that could produce crops but is currently used as pasture is excluded. Set-aside lands are included in the landbase to the extent that USDA has classified them as cropland. Both modeling approaches (ORECCL and ORIBAS) calculate farmgate prices of energy crops—ORECCL calculates the price as the net present value (NPV) price over the entire energy crop production cycle that provides a return to the farmer that is comparable to the NPV county cash rent for the same time frame, while ORIBAS calculates the NPV price that is comparable to the NPV of the expected profit from growing the current mix of conventional crops in the area over the same production cycle. The crop production cycle is assumed to be 10 years for switchgrass, 7 years for poplar, and 22 years for willow. Prices are based on all production practices needed to supply switchgrass bales stacked at the side of the road or wood chips contained in a van waiting at the side of the road. All prices are in 1993 dollars. The ORECCL analysis does not evaluate transportation costs, but ORIBAS estimates transportation costs from production site to a user facility for two levels of switchgrass demand (110,000 and 700,000 dry tons/year).
The two modeling approaches are useful in identifying the U.S. regions where energy crops can be grown at the lowest price and in estimating a reasonable expected price for energy crops for any given area of the country. However, interpretation of the results should consider two important caveats. First the methods used in the analyses contain no feedback mechanisms to reflect the change in conventional crop (e.g., corn, soybean) prices that would result as increasing acres were diverted to energy crop production. Thus, as the cumulative number of energy crop acres increase, the analysis would increasingly underestimate the price that would need to be offered for energy crops to maintain the same profit as conventional crop production. Second, the analyses estimate only the acres for which the estimated break-even energy crop price provides at least the same profit as conventional crops given the yield and production cost assumptions. It says nothing about how many acres of energy crops would actually be planted at that price. Thus, while the assessments may indicate that 40 million acres could produce energy crops if a market existed that would pay $35/dt, this should not be interpreted to mean that 40 million acres of energy crops will be produced and sold at $35/dt. An analytical approach that does consider price-supply interactions between conventional agricultural crops and energy crops is under development (De La Torre Ugarte and Ray 1998).
The review begins with a brief discussion of the two analytical approaches (ORECCL and ORIBAS) used to assess energy crop potential. Next, the results from each approach are compared and contrasted. Results on a national level are presented first, followed by regional and state results.
The Oak Ridge Energy Crop County-Level (ORECCL) database describes the
likely yields of energy crops (switchgrass and short rotation woody crops) at a
county-level (Graham et al 1996a, 1997b). In the 1996 version of ORECCL, only
two short rotation woody crops are considered—hybrid poplar and willow.
Furthermore, a county is assumed suitable for either hybrid poplar or willow
production but not both. Thus, the short rotation woody crop data given for a
county assume one or the other woody crop. Switchgrass is the only herbaceous
energy crop considered in ORECCL. The energy crop yields are based on expert
opinion as of 1996 and represent the yield that might be expected using best
management practices circa the year 2000 on existing cropland.
County-level Returns ($/acre/yr)=1993 state cropland cash rent * (county farmland value/state farmland value)
This approach assumes that cropland cash rent is a good surrogate for expected returns to land and management and that farmland value is controlled by the potential profitability of the cropland; therefore, geographic differences in farmland value can be used to infer geographic differences in likely returns to cropland. The approach has the drawback that factors other than profit expected from farming can influence farmland value (e.g., potential for residential development). Thus the ORECCL values for returns to cropland are inflated in counties and states with significant development pressures. For example, DuPage County just west of Chicago has very high county-level returns in ORECCL and thus very high farmgate energy crop prices. Fortunately such counties usually have very little cropland and, therefore are, comparatively insignificant from a larger perspective.
The production costs (other than returns to land and management which are the same as for hybrid poplar and switchgrass calculations) used in calculating the farmgate prices for willow are based on an unpublished version of BIOCOST adapted to willow (Walsh and Becker, personal communication, 1996)(2). Again the costs are in 1993 dollars.
ORIBAS is a GIS-based modeling system for predicting delivered feedstock costs across a state (Graham et al. 1996b, 1997a, Noon et al. 1996). ORIBAS relies on 1 km2 resolution maps of land use to spatially distribute potential energy crop supplies and road network maps to estimate transport costs. The system can compute farmgate prices and potential supplies endogenously, or these can be input to the system. If farmgate prices and supplies are calculated endogenously then the system requires information on conventional crop yields, prices, and production costs in addition to information on the energy crop yields and production costs. In its most complicated mode of calculation, the system also considers soil quality impacts on yields using the USDA model EPIC.3
In the set of ORIBAS analyses of switchgrass production considered in this paper, farmgate prices and supplies were calculated endogenously and took into consideration soil impact on yield. These ORIBAS analyses also relied on the BIOCOST model (version 1) for estimating switchgrass production costs (in 1993 dollars) other than returns to land and management. The endogenous calculation of farmgate prices and supplies did not consider the interactions between supply and price of conventional and energy crops.
The main difference between ORIBAS analyses and ORECCL in the estimation of farmgate prices is that the ORIBAS analyses did not use published cash rent and farmland values to infer expected returns from cropland. Rather, the ORIBAS analyses directly calculated expected returns from land and management on the basis of the predicted profitability of the major crops grown on the different soils within a county. Thus the ORIBAS returns were not influenced by development pressures on farmland value. Consequently the ORIBAS estimates of return to land and management are generally lower than those of ORECCL, and, thus, the ORIBAS-predicted farmgate prices are also lower. State-level differences in ORIBAS and ORRECL farmgate prices are given in the tables following each regional discussion in the paper.
ORIBAS predicts the number and location of bioenergy facilities (and their marginal delivered price for feedstock) that could be supported within a state given a priori assumptions about cropland availability and facility feedstock demand. In the ORIBAS analyses used for this review, two facility demand levels were examined—110,000 dry tons/year and 700,000 dry tons/year. Cropland available for switchgrass production was defined as the fraction of cropland within a county currently planted to the most dominant conventional crop. (Total cropland suitable for energy crop production in a county was based on the ORRECL value for that county.) In most cases, using this dominant crop strategy to define availability meant 40 to 60% of the ORECCL value for potential cropland in a county was allowed to produce switchgrass.
The ORIBAS algorithm for predicting facility sites and feedstock prices locates each facility one at a time, minimizing the marginal delivered price for feedstock until all the land designated in the state as available for switchgrass production has been used to supply plants. The location and the marginal-delivered price of switchgrass for each facility is a function of the predicted farmgate prices for switchgrass produced in the vicinity of the facility and the transport costs associated with moving that switchgrass to the facility. Per-ton transport costs are calculated on the basis of travel distance and travel time. The ORIBAS algorithm for siting plants first calculates the potential farmgate price and supply of switchgrass (based on yield) that could be produced on all land considered available for switchgrass. ORIBAS then calculates the costs of transporting that switchgrass to any location in the state. ORIBAS then determines the location in the state that could be supplied with 110,000 or 700,000 dry tons at the lowest cost. That location becomes the site of the first facility and the land (e.g., switchgrass supplies) used to support that facility is withdrawn from further consideration. ORIBAS then repeats those two steps to predict the next lowest cost facility location. This process is repeated until all the available land (i.e., supplies) in the state is being used to supply facilities. For this review, only the lowest cost 50% of the facilities are mapped and discussed. (That is, the facilities were ranked from lowest to highest cost and those facilities falling on the low half of the list are considered.) This set of facilities, if built, would utilize about 25% of the cropland in the state. Constraining land availability and only considering the “best facilities” is an inexact way of recognizing that cropland will be utilized for multiple crops and that if large acreages went into switchgrass production, other crop prices would change and thus the model’s prediction would become irrelevant.
The ORIBAS analysis of farmgate and delivered prices in selected states complements the ORECCL analysis. The ORECCL estimates of farmgate price are more extensive and more tied to actual land costs; however, ORIBAS attempts to account for finer scale geographic differences in energy crop yields and land value. Furthermore, ORIBAS provides estimates of delivered price, while ORECCL does not.
1 In November of 1997, energy crop yields and the energy crop landbase in the 1996 ORRECL database were readdressed in a workshop with energy crop researchers. Some yields were changed though none drastically. The most noticeable change was that switchgrass yields were reduced in the far west and the geographic variation of yields of all species was increased. Likewise some changes were made in defining the landbase but again not in a major way except for willow whose range was extended considerably southwards and made to overlap with the poplar range. At the same workshop, energy crop production approaches (e.g., amount of fertilizer etc) were also addressed and some changes in production were also made. Again the changes were not major although willow production costs will rise more than poplar or switchgrass. The production changes have not yet been fully incorporated into BIOCOST. Once BIOCOST is updated, ORECCL farmgate prices will be updated using the new yields, new BIOCOST and more recent cropland cash rent estimates. These updates will in general increase energy crop prices but fairly uniformly across the country so the spatial pattern of prices are likely to stay the same. And thus the general conclusions on energy crop potential derived from 1996 version of ORECCL will most likely not alter.
2 A revised version of BIOCOST based on the 1997 energy crop workshop will contain willow as a third energy crop.
3 EPIC is a USDA model for predicting crop production and erosion characteristics (Williams et al 1989).
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