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Economic Impacts of Bioenergy Production in the Agricultural Sector. Daniel G. De La Torre Ugarte. Energy Modeling Forum Snowmass, CO August 2, 2006. Objectives. Asses the impacts on agricultural sector and economics of the nation of agriculture as a major source of energy

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Economic impacts of bioenergy production in the agricultural sector

Economic Impacts of Bioenergy Production in the Agricultural Sector

Daniel G. De La Torre Ugarte

Energy Modeling Forum

Snowmass, CO

August 2, 2006


Objectives
Objectives Sector

  • Asses the impacts on agricultural sector and economics of the nation of agriculture as a major source of energy

  • Replace 25% of btu content of projected gasoline consumption with ethanol.

  • As with a pie, in this study, there are any number of slices one can take. The information presented here is but one slice.



Functions interactions
Functions & Interactions Sector

Crop Supply

Livestock

Expected Returns &

Production

(305 Regions)

(U.S.)

Available Acreage

Price

Acreage

Allocation Based on

Expected Returns

Available For Domestic

Consumption

Acreage, Production, Expenditures

Value of Exports & Production

Export Use

Food Use

Govt Payments

Cash Receipts

Domestic Use

Total Use

Production Expenses

Price

Crop Demand

Ag Income

Gross & Net Realized

Income

(U.S.)

(U.S.)


Polysys add in modules
POLYSYS Add-In Modules Sector

  • Stochastic: Introduce random shocks

    • Regional Yields

    • Export Shocks

  • Environmental: Replaces Crop Supply Module’s 305 Regional LPs

    • Allows up to 40 Rotational Activities

    • Allows Irrigated and Dryland

    • Four Dominant Soils


Us gasoline consumption and ethanol demand at 25 energy content

72 Billion Sector

US. Gasoline Consumption and Ethanol Demand at 25% Energy Content



Methodology
Methodology Sector


Methodology 2

Bio Sector

-

products and

National

Energy Policy

Bioenergy

Demand

Feedstock Price

Regional

Feedstock Supply

Agricultural Policy

Curves

Regional Bioenergy

Transportation and

and Bio

-

product

Conversion Cost

Supply Curves

Expansion

Curve for Bioenergy

and Bio

-

product

Industry

Methodology (2)


Feedstock price and allocation
Feedstock Price and Allocation Sector

New Biomass Price

Biomass & Crop

Supply

Feedstock Price Equivalent

Cellulosic vs Corn

Competition

If Other Demands not filled,

Fill with Corn Grain

Crop Demand

New Corn Price Determined

Figure Corresponding Biomass Price

Compare Prices

If difference, adjust price.

If no difference, quit.



The story
The Story Sector

  • Agriculture can have a significant role in meeting America’s energy needs.

  • Providing bio-energy feedstocks could be a new $25 billion industry measured in net returns.

  • Savings in government payments of $16 to $100 billion.

  • Could reduce imports of gasoline by 1.5 billion barrels or by more than $ 230 billion dollars


Assumptions for a potential outlook
Assumptions for a Potential Outlook Sector

  • Yields by 2025:

    • Major crops continue w/ trend line: corn (195 bu/ac), soybeans (51 bu/ac), wheat (53 bu/ac)

    • Energy crops (6 to12 dt/acre)

  • Management practices by 2025:

    • Corn: no-till (20% to 50%); reduced till (20% to 30%)

    • Wheat: no-till (12% to 50%; reduced till (20% to 30%

  • Land:

    • Total acres in cropland, forestland, pastureland are unchanged

    • CRP:15 of the 34.7 million acres are available for energy crop production


Assumptions for a potential outlook1
Assumptions for a Potential Outlook Sector

  • Commodity Programs:

    • Remain as specified in 2006

  • Conversion Efficiency:

    • Improved cellulosic ethanol to 89 gallons/ton by 2025 and corn ethanol conversion to 3 gallons/bushel by 2015

  • Other Energy

    • Further, we are in the analysis producing 1.7 billion gallons of biodiesel along with 250 to 500 billion kwh of electricity, but we have chosen to focus the presentation on ethanol


Feedstock for energy
Feedstock for Energy Sector*

Nearly 1 Billion Tons

* Does not include forest harvest


Land use 2006 2015 and 2025 million acres

CRP in 2025 Sector

(million acres)

Land Use: 2006, 2015, and 2025 (million acres)

Other

Hay

Energy Crop

Wheat

Soybeans

Corn

By 2025 14% of cropland is

in energy dedicated crops







Distribution of the Production Sector

of Cellulosic Materials, 2010

Tons


Distribution of the Production Sector

of Cellulosic Materials, 2015

Tons


Distribution of the Production Sector

of Cellulosic Materials, 2020

Tons


Distribution of the Production Sector

of Cellulosic Materials, 2025

Tons


Changes in farm income and government payments million
Changes Sector in Farm Income and Government Payments(million $)


Change Sector in Net Returns: 2010


Change Sector in Net Returns: 2015


Change Sector in Net Returns: 2020


Change Sector in Net Returns: 2025


Net economic impacts to national economy 2025
Net Economic Impacts to National Economy, 2025 Sector

  • The full economic impact extends beyond agriculture.

  • Incorporating changes in income, land shifts, and conversion of the biomass to energy we estimated the national impacts.


Conclusions
Conclusions Sector

Preliminary results indicate that:

  • There is sufficient potential from America’s agricultural and forest lands to produce energy without impacting food security

  • Currently, we have substantial capacity for production from underutilized lands


Conclusions continued
Conclusions (Continued) Sector

  • Marketing additional energy from agriculture sector could result in:

    • Increased Farm Income

    • Reduced Government Payments

    • Increased Rural Economic Development

    • Enhanced Environmental Benefits

    • Reduction in Foreign Oil Dependency


Net carbon eq flux to the atmosphere as a function of agricultural practice
Net carbon Sectoreq flux to the atmosphere as a function of agricultural practice



Land use for major crops million acres 2013
Land Use for Major Crops SectorMillion Acres -2013



Project analysis team includes Chad Hellwinckel, Kim Jensen, Jamey Menard, Roland Roberts, Marie Walsh, and Brad Wilson in addition to Burton English and Daniel G. de la Torre Ugarte

Bio-based Energy Analysis Group

http://beag.ag.utk.edu/

Agricultural Policy Analysis Center

http://agpolicy.org/

Department of Agricultural Economics, Institute of Agriculture

University of Tennessee http://www.agriculture.utk.edu/


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