Ethanol: On Beyond Corn

Is there a future for farmers in the ethanol industry beyond corn? It was the agricultural community that gave birth to “gasohol” 25 years ago, and corn farmers throughout the Midwest took part in ethanol promotion activities at service stations, county fairs, and anywhere a reporter might get interested in their pitch for a new market for corn. But with the federal biofuels mandate corn-based ethanol to 15 billion gallons, is there a future economic opportunity that agriculture can harvest?

The Federal Energy Independence and Security Act implements a growing market for corn based ethanol until the 15 billion gallon limit is reached in 2012, in an effort to preserve sufficient corn quantities for other market needs. Beyond that, cellulosic ethanol is expected to grow beyond the 30 billion gallon total biofuel supply in 2022. But where do farmers fit into that overall plan?
Agricultural economist Tom Capehart of the Congressional Research Service examined Congressional policy issues involving cellulosic biofuels and says they must overcome three challenges:
1) First, cellulosic feedstocks must be available in large volumes when needed by refineries.
2) Second, the cost of converting cellulose to ethanol or other biofuels must be reduced to a level to make it competitive with gasoline and corn-starch ethanol.
3) Third, the marketing, distribution, and vehicle infrastructure must absorb the increasing volumes of renewable fuel, including cellulosic fuel mandated by the RFS.
Obviously, farmers must carve out their niche in the first challenge, if there is to be one. Capehart notes there are doubters who are “questioning whether the United States could ever produce and manage sufficient feedstocks of starches, sugars, vegetable oils, or even cellulose to permit biofuel production to meaningfully offset petroleum imports.” To many biofuel communities in the Cornbelt, “the gauntlet has been thrown down.”

Ethanol will likely be produced from a variety of cellulose sources, according to Capehart, including municipal solid waste, construction debris, and residues from the logging, lumber, and paper industries. Not much for farmers in those areas. However, other potential cellulose sources include crop residues, such as corn stalks and wheat straw, as well as perennial grasses, such as switchgrass and miscanthus. But farmers wanting to cultivate the latter will run into a challenge the CRS economist describes as, “Cellulosic feedstocks may have some environmental drawbacks. Some crops suggested for biomass are invasive species when planted in non-native environments.”

The prairie grass issue might be resolved if your ancestors could testify that they burned off switchgrass in Cornbelt states when they began the farmsteads you now operate. It was the dense, itchy stuff that pioneers fought every day as their covered wagons traveled westward. But to grow switchgrass that might be profitable, it may require several years to reach its full yield potential. Capehart quotes University of Tennessee statistics that indicate the top yield potential is two tons per acre in the first year and seven tons after the third year, which would produce up to 1,000 gallons of ethanol. An alternative is the Asian grass miscanthus, which can produce 2.5 times the amount of ethanol that corn currently produces, which is estimated at 1,100 gallons per acre. Researchers at South Dakota State and the University of Minnesota have both looked at other native prairie grass mixtures that seem promising for ethanol production, without the criticism of being “a non-native specie.”

Farmers who have baled wheat or oat straw have harvested and stored biomass for years, so there is nothing new there. Cornstalks are another issue, and Capehart suggests the need for a single machine that can harvest corn for grain and stalks for biomass in one pass through the field. And protective storage for corn stover will be a significant process and investment, which will have to borne by farmers. But imagine that an enterprising group of investors plans to build a cellulosic ethanol plant in your neighborhood and recruits you to produce the feedstock for it.
• It will produce 10-20 million gallons of ethanol per year
• It will operate 24/7 and will need 700 tons per day.
• If the plant wants corn stover, it will cost $39 to $46 per ton to transport it 30 miles.
• If the plant wants switchgrass, it will cost $57 to $63 per ton to transport it 30 miles.

CRS economist Capehart notes that harvesting corn stalks will not reduce food output, but growing grasses would displace food crops on cropland. Farmers considering such a new crop would have to calculate the multi-year commitment that would be required. The initial start-up years would have equipment investment along with a lower level of revenue for grass production. However, planting grasses will required a commitment from landowners, should such production occur on rented land, and that would mean multi-year leases.

Summary:
With US energy policy moving toward biofuels, and a limit on how much corn can be used for ethanol production, farmers will not be shut out of the market. Options are available for substantial involvement in supplying feedstocks for cellulosic ethanol producers. Those include both production of grasses, as well as harvesting of corn stalks. Farmers will have to work out marketing agreements that would compensate them for additional equipment outlays, storage and transportation costs, and early revenue losses in the case of grass production.

Source: Stu Ellis, http://www.farmgate.uiuc.edu