Switching to an energy crop: Break even or make a profit?

Oct 31, 2012

Along with the growing interest in biomass energy crops as renewable alternatives to fossil fuels comes a growing list of questions from corn and soybean farmers about what it will cost them to switch. University of Illinois agricultural economist Madhu Khanna developed a customizable online calculator to eliminate some of the guesswork and help farmers make the decision.

"We've been doing calculations on what it would cost to produce in Illinois and other states for quite some time, and we realized that it could be useful to people who want to be able to calculate what these costs would be on their own farm," Khanna said. "We wanted to create a calculator so farmers would be able to make their own assessment."

The cost and profitability calculator can be found at http://miscanthus.ebi.berkeley.edu/Biofuel/.

"It's an information dissemination tool," Khanna said. "The calculator allows farmers to put in their own parameters. They can customize the costs based on what their current farming operation looks like, what their current returns are on the land that they are thinking about converting, and learn what it would cost to grow an energy crop on it instead. They can decide at what price it might be feasible for them to produce an energy crop. What is the minimum price they would need in order to make it worthwhile?"

After selecting a baseline crop that they are currently farming, users provide specific information about their expenses, yields, and inputs.

"Unlike corn and soybeans where we've had years of experience and people have developed recommended, standardized application rates and planting techniques, these crops are still very experimental," Khanna said. "We're still figuring out what the optimum rate of nitrogen application should be, the timing for harvest, and so on. This is based on a representative set of assumptions using our best knowledge to date."

Before using the calculator, Khanna recommends that farmers gather some key information about their current operating expenditures. For example, one line item on the calculator requires the discount rate.

"If farmers are thinking of growing energy crops purely as an investment decision, then they would be interested in getting the same return from their investment in an energy crop over time as they would get if they were to put this money in the bank. That's the discount rate they should use when discounting future returns to compare them to the upfront investment that would be needed to establish an energy crop," Khanna said. "If the bank is going to give them 4 percent, then they should at least get a 4 percent return on growing an energy crop instead."

Khanna said that although the calculator has been internally tested, it hasn't been tested by real users. She would welcome feedback from farmers about the calculator. Are there aspects of the calculator that need more explanation? What problems arise? Is the calculator easy to use?

Khanna hopes to use feedback to create a list of frequently asked questions. "There is a clickable link on the website to submit questions. We hope to get input from users so that we can update the information as it becomes available," she said.

Although Khanna has data for all rain-fed states in the United States, this first version of the online calculator includes data for only Illinois, Michigan, and Oklahoma. "We presented these three states as illustrative," Khanna said. "We looked at poplar, , switchgrass, prairie grass, and stover. They behave differently in different parts of the country, so this initial calculator shows the contrast between three very different climate and rainfall regions."

The includes costs for converting both currently cropped land and marginal land.

"Land cost is a significant part of the cost of producing energy crops," Khanna said. "One reason for looking at marginal or less productive cropland is to show that the cost of producing these energy crops is expected to be significantly lower on land that is less productive for growing row crops but could be used productively to grow energy crops.

"If you have land that's currently not being put to any economic use, then you might be able to get high yields from energy crops.

Miscanthus doesn't seem to require very high-quality crop land to begin with, although that is still being studied through field experiments. It's not affected adversely by low soil quality and nutrient values. So, in southern Illinois, for example, corn yields may be low compared with central Illinois, but Miscanthus could be more productive," Khanna said.

Explore further: Stanford researchers rethink 'natural' habitat for wildlife

More information: For more information, an in-depth explanation of how the categories and calculations were developed is available on the farmdoc website at www.farmdoc.illinois.edu/manage/newsletters/fefo11_06/fefo11_06.pdf

The calculator was based on the article The breakeven costs of alternative feedstocks for cellulosic biofuels, which was published in Aspects of Applied Biology.

add to favorites email to friend print save as pdf

Related Stories

Grasses have potential as alternate ethanol crop, study finds

Nov 01, 2010

Money may not grow on trees, but energy could grow in grass. Researchers at the University of Illinois have completed the first extensive geographic yield and economic analysis of potential bioenergy grass crops in the Midwestern ...

Miscanthus adapts

Jun 06, 2011

An article in the current issue of Global Change Biology Bioenergy finds that natural populations of Miscanthus are promising candidates as second-generation energy sources because they have genetic variation that may in ...

Recommended for you

Plants with dormant seeds give rise to more species

Apr 18, 2014

Seeds that sprout as soon as they're planted may be good news for a garden. But wild plants need to be more careful. In the wild, a plant whose seeds sprouted at the first warm spell or rainy day would risk disaster. More ...

Scientists tether lionfish to Cayman reefs

Apr 18, 2014

Research done by U.S. scientists in the Cayman Islands suggests that native predators can be trained to gobble up invasive lionfish that colonize regional reefs and voraciously prey on juvenile marine creatures.

User comments : 0

More news stories

Biologists help solve fungi mysteries

(Phys.org) —A new genetic analysis revealing the previously unknown biodiversity and distribution of thousands of fungi in North America might also reveal a previously underappreciated contributor to climate ...

Researchers successfully clone adult human stem cells

(Phys.org) —An international team of researchers, led by Robert Lanza, of Advanced Cell Technology, has announced that they have performed the first successful cloning of adult human skin cells into stem ...

NASA's space station Robonaut finally getting legs

Robonaut, the first out-of-this-world humanoid, is finally getting its space legs. For three years, Robonaut has had to manage from the waist up. This new pair of legs means the experimental robot—now stuck ...

Ex-Apple chief plans mobile phone for India

Former Apple chief executive John Sculley, whose marketing skills helped bring the personal computer to desktops worldwide, says he plans to launch a mobile phone in India to exploit its still largely untapped ...

Filipino tests negative for Middle East virus

A Filipino nurse who tested positive for the Middle East virus has been found free of infection in a subsequent examination after he returned home, Philippine health officials said Saturday.

Egypt archaeologists find ancient writer's tomb

Egypt's minister of antiquities says a team of Spanish archaeologists has discovered two tombs in the southern part of the country, one of them belonging to a writer and containing a trove of artifacts including reed pens ...

Airbnb rental site raises $450 mn

Online lodging listings website Airbnb inked a $450 million funding deal with investors led by TPG, a source close to the matter said Friday.