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Corn Stover Economic Considerations. Integrated Crop Management Conference Ames, Iowa November 29, 2012 Chad Hart and William Edwards Department of Economics Iowa State University. Renewable Fuels Standard (RFS). Source: NREL.

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slide1

Corn Stover Economic Considerations

Integrated Crop Management Conference

Ames, Iowa

November 29, 2012

Chad Hart and William Edwards

Department of Economics

Iowa State University

cellulosic biofuel is a new market

As a new market, there is uncertainty about many aspects of production and trade

What are the revenues/costs of biofuel and feedstock production?

How will these revenues/costs flow through the supply chain?

Cellulosic Biofuel is a New Market

contract

Legally binding agreement to exchange goods or services for a payment

  • Outlines the risk-return tradeoff between buyers and sellers
  • Often addresses the major benefits/challenges of the trade

Contract

essential elements for producer participation in biomass markets

Essential Elements for Producer Participation in Biomass Markets

Darren H. Jarboe, Bobby J. Martens, M. Mainul Hoque, and Georgeanne M. Artz

Iowa State University

Survey conducted in 2011

Sent to 2,250 Iowa crop producers farming 50 acres or more

biofuels knowledge
Biofuels Knowledge

Source: Jarboe, et al. 2011

interest in supplying biomass
Interest in Supplying Biomass

Source: Jarboe, et al. 2011

soil and residue management
Soil and Residue Management

Source: Jarboe, et al. 2011

producer challenges
Producer Challenges

Challenge Average Rating

Nutrient loss 5.55

Distance to markets 5.52

Long-term biomass market viability 5.44

Biomass price volatility 5.26

Soil erosion issues 5.19

Percent of biomass removed 5.13

In-field transport and compaction 5.00

Contract opt-out clauses 4.99

Contract terms of storage 4.93

Residue management 4.92

Source: Jarboe, et al. 2011

brief outline of 2012 dce contract
Brief Outline of 2012 DCE Contract
  • Harvest 2 dry tons per acre
  • $7.50 per bale
  • $1.50 per acre if not harvested
  • Bales moved to field edge within a week
  • Bales moved from field edge by March 2013
  • DCE covers harvest, transportation, and storage costs
pricing corn stover
Pricing Corn Stover

Added costs to seller (minimum price to accept)

  • Harvesting and transporting (unless buyer does this)
  • Nutrient replacement
  • Reduced tillage? (cost saved)
  • Yield effect?

Value to buyer (maximum price to pay)

  • Tied to price of gas and oil (ethanol use)
  • Tied to prices of alternative feedstuffs (feed use)

For trade to occur, the price must be between these values.

slide13

Ag Decision Maker file A1-70,

”Estimating a Value for Corn Stover”

added costs to seller
Added Costs to Seller
  • Harvesting costs (custom rates, $/acre)
    • Chopping stalks $11.05
    • Raking $ 6.20
    • Baling ($11.50 / bale x 4 bales/ac) $46.00
    • Transport (20 [email protected]$.25/mi/bale x4) $20.00
    • Total $83.25
nutrient removal per ton of dry matter

5.9 lb. P @ $.53 $ 3.13

25.0 lb. K @ $.55 $13.75

$16.88 / dry ton

X 80% dry matter $13.50 /wet ton

x .6 wet tons/bale x 4 bales/ac = $32.40/acre

+ harvesting costs $83.25/acre

Total cost per acre $115.62

Cost per wet ton (80% d.m.) $ 48.19 /ton

Nutrient removal per ton of dry matter
maximum price to offer value of feedstuffs replaced
Maximum Price to Offer(value of feedstuffs replaced)
  • 1.16 tons grass/legume hay per ton of stover @$125 $145.00
  • minus .22 tons of distillers grains @$260 $ 57.20

$ 87.80/t. stover

Price range = $48.19 to $87.80

price for ethanol feedstock
Price for Ethanol Feedstock
  • Maximum price depends on value of crude oil, other feedstocks, gasoline, etc.
  • If processor does the harvesting, producer needs to cover added fertility costs, only.
  • Example: $13.40 per wet ton

$32.40 per acre

relevant trading range
Relevant Trading Range
  • Buyer and seller can bargain between the maximum and minimum
  • If the minimum price > maximum price, it is not economical to use the stover
other items to consider
Other Items to Consider

Source: Darr, et al. 2012

  • Cleanliness of stover
  • Yield impacts of stover removal?
  • Less tillage needed?
  • Compaction?
  • Time needed for fall tillage and fertilizer?
thank you for your time any questions ag decision maker http www extension iastate edu agdm
Thank you for your time!Any questions?Ag Decision Maker:http://www.extension.iastate.edu/agdm/
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