Saturday, June 16, 2007

Ethanol Expansion in the United States: How Will the Agricultural Sector Adjust?

Ethanol Expansion in the United States: How Will the Agricultural Sector Adjust?

By Paul Westcott | Washington, D.C.: USDA Economic Research Service, 2007.
Outlook Report No. (FDS-07D-01) 20 pp, May 2007

Ethanol production in the United States totaled almost 5 billion gallons in 2006, about 1 billion gallons more than in 2005. While this was a significant increase, further expansion in the industry is continuing, with production expected to exceed 10 billion gallons by 2009. This large and rapid expansion of U.S. ethanol production affects virtually every aspect of the field crops sector, ranging from domestic demand and exports to prices and the allocation of acreage among crops. Many aspects of the livestock sector are affected too. As a consequence of these commodity market impacts, farm income, government payments, and food prices also change. Adjustments in the agricultural sector are already underway and will continue for many years as interest grows in renewable sources of energy to lessen dependence on foreign oil.

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Emerging Biofuels: Outlook of Effects on U.S. Grain, Oilseed, and Livestock Markets

Emerging Biofuels: Outlook of Effects on U.S. Grain, Oilseed, and Livestock Markets

Simla Tokgoz, Amani Elobeid, Jacinto F. Fabiosa, Dermot J. Hayes, Bruce A. Babcock, Tun-Hsiang (Edward) Yu, Fengxia Dong, Chad E. Hart, John C. Beghin
| Center for Agriculture and Rural Development (CARD) | May 2007 | 07-SR 101 |

Projections of U.S. ethanol production and its impacts on planted acreage, crop prices, livestock production and prices, trade, and retail food costs are presented under the assumption that current tax credits and trade policies are maintained. The projections were made using a multi-product, multi-country deterministic partial equilibrium model. The impacts of higher oil prices, a drought combined with an ethanol mandate, and removal of land from the Conservation Reserve Program (CRP) relative to baseline projections are also presented.

The results indicate that expanded U.S. ethanol production will cause long-run crop prices to increase. In response to higher feed costs, livestock farmgate prices will increase enough to cover the feed cost increases. Retail meat, egg, and dairy prices will also increase. If oil prices are permanently $10-per-barrel higher than assumed in the baseline projections, U.S. ethanol will expand significantly. The magnitude of the expansion will depend on the future makeup of the U.S. automobile fleet. If sufficient demand for E-85 from flex-fuel vehicles is available, corn-based ethanol production is projected to increase to over 30 billion gallons per year with the higher oil prices. The direct effect of higher feed costs is that U.S. food prices would increase by a minimum of 1.1% over baseline levels. Results of a model of a 1988-type drought combined with a large mandate for continued ethanol production show sharply higher crop prices, a drop in livestock production, and higher food prices. Corn exports would drop significantly, and feed costs would rise. Wheat feed use would rise sharply. Taking additional land out of the CRP would lower crop prices in the short run. But because long-run corn prices are determined by ethanol prices and not by corn acreage, the long-run impacts on commodity prices and food prices of a smaller CRP are modest.

Cellulosic ethanol from switchgrass and biodiesel from soybeans do not become economically viable in the Corn Belt under any of the scenarios. This is so because high energy costs that increase the prices of biodiesel and switchgrass ethanol also increase the price of corn-based ethanol. So long as producers can choose between soybeans for biodiesel, switchgrass for ethanol, and corn for ethanol, they will choose to grow corn. Cellulosic ethanol from corn stover does not enter into any scenario because of the high cost of collecting and transporting corn stover over the large distances required to supply a commercial-sized ethanol facility.

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Appendix B: Scenario Results [889 pp.]


Ethanol and Biofuels: Agriculture,Infrastructure, and Market Constraints Related to Expanded Production

Ethanol and Biofuels: Agriculture,Infrastructure, and Market Constraints Related to Expanded Production

| Brent D. Yacobucci, Specialist in Energy Policy, Resources, Science, and Industry Division | Randy Schnepf, Specialist in Agricultural Policy Resources, Science, and Industry Division | Congessional Research Service | March 16, 2007 | RL33928 |

High petroleum and gasoline prices, concerns over global climate change, and the desire to promote domestic rural economies have greatly increased interest in biofuels as an alternative to petroleum in the U.S. transportation sector. Biofuels, most notably corn-based ethanol, have grown significantly in the past few years as a component of U.S. motor fuel supply. Ethanol, the most commonly used biofuel, is blended in nearly half of all U.S. gasoline (at the 10% level or lower in most cases). However, current biofuel supply represents less than 4% of total gasoline demand. While recent proposals have set the goal of significantly expanding biofuel supply in the coming decades, questions remain about the ability of the U.S. biofuel industry to meet rapidly increasing demand. Current U.S. biofuel supply relies almost exclusively on ethanol produced from Midwest corn. In 2006, 17% of the U.S. corn crop was used for ethanol production.

To meet some of the higher ethanol production goals would require more corn than the United States currently produces, if all of the envisioned ethanol was made from corn. Due to the concerns with significant expansion in corn-based ethanol supply, interest has grown in expanding the market for biodiesel produced from soybeans and other oil crops. However, a significant increase in U.S. biofuels would likely require a movement away from food and grain crops. Other biofuel feedstock sources, including cellulosic biomass, are promising, but technological barriers make their future uncertain. Issues facing the U.S. biofuels industry include potential agricultural "feedstock" supplies, and the associated market and environmental effects of a major shift in U.S. agricultural production; the energy supply needed to grow feedstocks and process them into fuel; and barriers to expanded infrastructure needed to deliver more and more biofuels to the market.

This report outlines some of the current supply issues facing biofuels industries, including the limitations on agricultural feedstocks, infrastructure constraints, energy supply for biofuel production, and fuel price uncertainties.

There is continuing interest in expanding the U.S. biofuel industry as a strategy for promoting energy security and environmental goals. However, there are limits to the amount of biofuels that can be produced and questions about the net energy and environmental benefits they would provide. Further, rapid expansion of biofuel production may have many unintended and undesirable consequences for agricultural commodity costs, fossil energy use, and environmental degradation. As policies are implemented to promote ever-increasing use of biofuels, the goal of replacing petroleum use with agricultural products must be weighed against these other potential consequences.

Introduction ..... 1
Issues with Corn-Based Ethanol Supply ..... 3
Overview of Long-Run Corn Ethanol Supply Issues ..... 3
Agricultural Issues ..... 4
Feed Markets ..... 5
Exports .... 5
Food vs. Fuel ..... 6
Energy Supply Issues ..... 6
Energy Balance ..... 6
Natural Gas Demand ..... 7
Energy Security ..... 7
Infrastructure and Distribution Issues ..... 8
Distribution Issues ..... 8
Higher-Level Ethanol Blends .... 9
Sugar Ethanol ..... 10
Biodiesel ..... 11
Cellulosic Biofuels ..... 11
Conclusion ..... 12

List of Tables
Table 1. U.S. Production of Biofuels from Various Feedstocks .... 3


Saturday, June 9, 2007

Dissertation: Cost to Deliver Lignocellulosic Biomass to a Biorefinery

Cost to Deliver Lignocellulosic Biomass to a Biorefinery
by Mapemba, Lawrence Daniel, Ph.D., Oklahoma State University, 2005, 275 pages | Jan 2006 | AAT 317955 |

Scope and method of study
The purpose of this study was to determine the cost to deliver a continuous flow of lignocellulosic biomass (LCB) to a biorefinery that can process 1,000, 2,000 or 4,000 tons of biomass per day.

The study also sought to determine how the method of modeling harvest and procurement cost of biomass changes the cost to deliver a steady flow of biomass to a biorefinery. Lignocellulosic biomass includes agricultural residues (e.g. corn stover and wheat straw), herbaceous crops (e.g. alfalfa, switchgrass) and improved pastures (old world bluestem, tall fescue and bermuda grass).

A mixed integer mathematical programming model was developed to determine the optimal size and location of a biorefinery, the quantity and types of biomass to be used, sources of biomass feedstock, monthly harvest and storage quantities, number of harvest machines to be used, and the cost to deliver a steady flow of biomass to a biorefinery, among other variables of interest. [snip]

Findings and conclusions.
Based on this study an LCB biorefinery business is expected to develop in concert with well coordinated biomass feedstock harvest units. [snip]. A total of 26 harvest units at an average investment of $15.34 million would be required to harvest biomass feedstock for a large plant (i.e. plant with capacity to process 4,000 dry tons of biomass per day). These harvest units would result in a per ton harvest cost of $10.72.

The biomass industry may use a variety of biomass feedstock species that mature at different periods during the year. [snip]. A variety of biomass feedstock types would result in a harvest season of nine months. This would result in a lower cost to deliver LCB to a biorefinery than a shorter harvest season. Since the plant would operate throughout the year a short harvest season would result in large storage reserves for long periods leading to high storage costs. For the assumptions used it was determined that feedstock would be hauled from an average radius of 106 miles to the biorefinery.

The ProQuest Dissertations & Theses database (PQDT)

Sunday, June 3, 2007

DSM Register: SOIL - Increase Corn Acres Could Worsen Erosion

Erosion: Drive to increase corn acres could damage soil
By PERRY BEEMAN | REGISTER STAFF WRITER | Des Moines Register | June 3, 2007

Plowing trees and native grasses on land held in conservation to plant more corn will reverse decades of work to prevent crop-related pollution, scientists say.

State researchers suggest that Iowa farmers will put 500,000 acres now in the Conservation Reserve Program back into production, as a result of the demand for corn-based ethanol and rising corn prices.
"These are historic changes that have people worried about the environmental consequences," said Bruce Babcock, director of the Center for Agricultural and Rural Development at Iowa State University. "We will have more soil erosion, more chemical runoff and less habitat. ... There is no free lunch."


In fact, 20 pounds of soil washes away for every gallon of ethanol made, according to Duane Sand, a consultant to the Iowa Natural Heritage Foundation, a nonprofit conservation and land-preservation group. His soil-loss figure is based on erosion data from the U.S. Department of Agriculture's National Resources Inventory, and industry data on corn yields and ethanol production per bushel.


Additionally, ethanol producers' move toward making more cellulosic ethanol from cornstalks won't necessarily benefit the environment. Cornstalks help replenish the soil and sweep heat-trapping carbon dioxide from the sky, said Spencer Tomb, a biology professor at Kansas State University.

On the other hand, the switch to cellulosic, done right, could be a boon to wildlife and to water quality, various scientists have reported. Growing switchgrass or other alternative crops to make ethanol could cut soil erosion. In addition, the year-round ground cover would reduce greenhouse gases in the atmosphere.


DSM Register: WATER USE - Biofuel Plants' Thirst Creates Water Worries

Water use: Biofuel plants' thirst creates water worries
State regulators fear some parts of Iowa won't have enough water to handle the booming biofuels industry.

PERRY BEEMAN |REGISTER STAFF WRITER | Des Moines Register | June 3, 2007

Plant operators say they have reduced the amount of water needed to produce ethanol, but the facilities still need abundant local water supplies. A single plant producing 100 million gallons of ethanol a year - a capacity quickly becoming the norm - uses as much water as a town of approximately 10,000 people, the Iowa Department of Natural Resources reports.
That's 400 million gallons of water a year for one plant - and scientists aren't sure the state has enough water to handle the ethanol boom and other expanding industries.

The last statewide water-use inventory was a dozen years ago. Back then, biofuel plants used less than 5 percent of the state's water. The percentage is 7 percent now and could grow to 14 percent by 2012, after planned expansions and new plants come online, according to an October study by the Minnesota-based Institute for Agriculture and Trade Policy.

"It frankly is one of our important natural resource issues," said state geologist Robert Libra of the Iowa Department of Natural Resources. "We haven't paid attention to the water supply in a long time. We need to do so before there is a panic." The Legislature this year allocated $480,000 so the DNR can update water records that haven't had a full review since the mid-1990s.

Those studies suggested water resources were already poor in most of west-central and southern Iowa, fair in the state's northwest corner and good in the northeast.

Meanwhile, local water supplies are dictating industry growth in Iowa and other states.

In Buena Vista County near Alta, Oregon Trail Energy recently requested permission to pump up to 788 million gallons of water a year for a 120 million-gallon-a-year ethanol plant. State officials approved the request, which includes water for future expansion.

In Minnesota, plans to build a plant in Pipestone were abandoned because the area lacked the 350 million gallons of water a year that was needed to make 100 million gallons of ethanol, a report by the Institute for Agriculture and Trade Policy found. Plants built in Heron Lake and Atwater moved from locations with water supply problems.

In Grand Island, Neb., an ethanol plant won approval only after its water demand was offset by cutbacks in water use in an agricultural area 15 miles away, the trade and policy institute reported.

"Ethanol won't dry up the state," Libra said of Iowa. "But it raises local questions, especially with other development." Power plants, the state's largest water users, consume far more than ethanol plants. But while power plants return water to streams and rivers, ethanol plants are a different story. They recycle some water, but export much of it in steam.[snip]

Ethanol plants use so much water that the DNR plans to study how much water the state's rivers and underground supplies can provide under various conditions. The supply changes significantly with rain and with drought.

"Today, biofuels are a small part of the groundwater demand, but a growing one," Libra said.


"We are lacking the scientific basis for some of our water-supply decisions," Gieselman said.

Greg Krissek, director of governmental affairs for Kansas-based ICM, an engineering firm that has worked on many Iowa plants, said the industry has become more efficient in its water use. Producing a gallon of ethanol took six gallons in 1998, compared with six to 11 gallons for gasoline. Water use dropped to three to four gallons per gallon of ethanol produced by last year, and is expected to drop below three gallons this year, Krissek said.

Production of biodiesel fuels uses even less water: An average of one to two gallons of water per gallon of fuel, he said.

Plants are looking for ways to use wastewater from municipal plants, and maybe even livestock operations, to reduce the amount needed from underground supplies. However, Krissek said limits on chloride and other salts in discarded water may make that recycling difficult.

Dennis Keeney, a senior fellow at the Institute for Agriculture and Trade Policy who led an analysis of the issue last fall, offers another warning. "We don't know what's out there and what the water table is" in Iowa, said Keeney, who once ran the Leopold Center for Sustainable Agriculture at Iowa State University. "This is true for all development. We need to know what's out there before we go willy-nilly into something."
[For full details concerning biofuels and water issues visit The Bioeconomy Blog posting for PowerPoint presentation(s) and a radio interview with Dennis Keeney.]


DSM Register: WATER QUALITY - River Pollution

Water quality: Wastewater often pollutes rivers

PERRY BEEMAN | REGISTER STAFF WRITER | Des Moines Register | June 3, 2007

Eleven biofuels plants have been cited by the state Department of Natural Resources for wastewater violations that include polluting streams based on permit limits under the federal Clean Water Act, according to the Register's analysis of state records for 34 plants in operation during six years.

Ethanol production requires purified water. When plants treat the water, their sewage discharges can include toxic salt levels and high iron levels. That kind of pollution can harm fish and cattle that drink from streams.

According to the Iowa Environmental Council, the concentrations of chloride and other suspended solids, mainly salts, coming from ethanol plants are among the highest of any industry in the state.

One plant that's had repeated water pollution problems is Siouxland Energy & Livestock Coop in Sioux Center.
The problems included emitting 13 times as many salts and other dissolved solids as its permit allowed. Siouxland has continued to have environmental infractions. In February 2006, the plant was cited for discharging sewage with five times more iron than allowed by its permit.

Other plants have had discharge problems.

Voyager Ethanol in Emmetsburg reported iron discharges at 30 times over the permit limit last year, a problem the plant had battled in 2005, too.
Western Iowa Energy in Wall Lake discharged water last year with nine times the iron allowed.

Overwhelmed in Iowa Falls
Plants have released large amounts of wastewater that is toxic to fish and plants. The waste means more chloride in the water, which harms aquatic life and livestock.

Iowa Falls' municipal sewage treatment plant found wastewater from Cargill's biodiesel plant was so high in organic matter - ammonia and oxygen-depleting compounds - that the plant couldn't treat it.


Chemicals: From field to streams
Ethanol plants are driving Iowa farmers to plant more corn and seek higher yields. More acres of corn will mean more fertilizer applications. Biologists say the loss of grasslands and woods would mean less filtering of fertilizer runoff as it heads to water supplies. Those factors lead to more nitrates in waterways. Nitrates are a colorless, odorless compound that forms when fertilizers break down. Nitrates also come from animal manure.

In untreated water, nitrates have been associated with "blue-baby syndrome" - in which a baby's blood is stripped of its ability to carry oxygen - and a variety of cancers. A survey last year by the University of Iowa found 10 percent of rural water wells had nitrates at levels above the drinking water standard, but the contamination comes from a variety of sources.