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Biofuels Economics: How Many Acres Will Be Needed For Biofuels? Part I

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Cole Gustafson, NDSU Extension Service Biofuels Economist Cole Gustafson, NDSU Extension Service Biofuels Economist
Economists are striving to delineate the impact of the 2007 Energy Independence and Security Act on crop acreage demand.

By Cole Gustafson, Biofuels Economist

NDSU Extension Service

Ethanol has received considerable scrutiny from the national media questioning the industry’s impact on food prices and availability. The crux of these stories has been that expansion of the ethanol industry has required more crop acres for corn production, which has resulted in fewer acres being available for food production. The ethanol industry has countered these arguments by stating that byproduct feeds (distillers grains) are now available as replacement feedstuffs for livestock and that gasoline prices would be considerably higher without the availability of ethanol.

This is not a trivial argument. The U.S. is expected to produce more than 9 billion gallons of ethanol this year. Assuming current ethanol plants produce 3 gallons of ethanol from each bushel of corn, 3 billion bushels of corn will be required in 2008. With a national average corn yield of 150 bushels per acre, 20 million acres will be utilized.

While both sides can debate the impact of how we got here, a more constructive analysis is needed to assist farmers and ranchers with strategic planning so they can respond optimally to the new 2007 Energy Independence and Security Act.

The 2007 Energy Independence and Security Act sets a national goal of producing 36 billion gallons per year (BGY) of biofuels annually. This production goal is four times the previous goal of producing 7.5 BGY specified in the 2005 Renewable Fuel Standard Act. That earlier goal was surpassed last year.

An important distinction in the new 2007 Energy Independence and Security Act are the different types of biofuels defined in the legislation. The different types are conventional biofuels, advanced biofuels and cellulosic biofuels. Conventional biofuels primarily are ethanol that is produced from traditional corn ethanol plants. Cellulosic biofuels are those fuels that potentially could be produced from a wide variety of feedstocks, such as stovers, grasses, wood products and urban yard waste. Advanced biofuels are a special category in which sugar beet- and cane-produced ethanol fits in. Recall in a previous column that each category technically is defined on its contribution to the reduction of greenhouse gas emissions (conventional a 20 percent reduction, advanced 50 percent and cellulosic 60 percent).

Economists are striving to delineate the impact of the 2007 Energy Independence and Security Act on crop acreage demand. At the moment, a wide range of scenarios is emerging. These scenarios differ primarily on their assumptions regarding technology and policy. For illustrative purposes, I will discuss two scenarios that are on each end of the spectrum.

The first extreme scenario assumes that ethanol production technology and existing legislation with respect to ethanol policy will remain static. If this is the case, incredible demands will be placed on existing agricultural resources. With stagnant corn yields, more acres will be required for corn production to meet the production goal for conventional biofuels. In addition, acreage also will be needed to produce crops for both advanced and cellulosic biofuels. While some new land may be brought into crop production, most of this acreage will have to be taken away from other crops.

Scenario No. 1 would place extreme pressure on already tight feed and food supplies. Critics of renewable energy often base arguments on this scenario. While this scenario could happen, it is doubtful that either technology and/or policy will remain stagnant. Most likely, U.S. farm technology will continue to evolve as it has during the past century. Likewise, federal energy and agriculture policy will adjust to this new setting.

Next time, I will discuss scenario No. 2. Under this view, it is possible that no additional cropland would be required to meet the new national goal of producing 36 BGY of biofuel. Again, it is unlikely or extreme because three important technology innovations and policy changes will have to happen. More next time.

Questions

Q: Are there any byproducts from cellulosic ethanol, similar to distillers grains, from the ethanol process? (Bill, White River, S.D.)

A: There is a byproduct from the cellulosic to ethanol process called lignin. However, whether the cellulosic conversion process is thermal or enzymatic, it is a more complete process than corn ethanol. Few, if any, nutrients are left in the byproduct. It’s only real value is as an energy source and most likely will be burned as fuel in the plant. A colleague compares lignin to twine on a bale of switchgrass hay. It’s fiberous, so cattle won’t eat it. That leaves burning as the only thing you can do with it.


NDSU Agriculture Communication

Source:Cole Gustafson, (701) 231-7096, cole.gustafson@ndsu.edu
Editor:Rich Mattern, (701) 231-6136, richard.mattern@ndsu.edu
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