Biofuel Distribution

This paper examines the impact of declining energy prices on biofuels production and use and its implications to agricultural commodity markets. It uses PEATSim, a dynamic partial equilibrium, multi-commodity, multi-country global trade model of the agriculture sector to analyze the interaction between biofuel, crop and livestock sectors. The ability of countries to achieve their energy goals will be affected by future direction of petroleum prices. A 50 percent decline in petroleum prices (absent of mandates) would result in rapid decline in biofuel use worldwide accompanied by a decline in feedstock and biofuel prices. About a 21 percent decline in U.S. cost of ethanol production is needed to make ethanol competitive with gasoline and to offset the effect of lower energy prices.

This paper introduces a spatial bioeconomic model for study of potential cellulosic biomass supply at regional scale. By modeling the profitability of alternative crop production practices, it captures the opportunity cost of replacing current crops by cellulosic biomass crops. The model draws upon biophysical crop input-output coefficients, price and cost data, and spatial transportation costs in the context of profit maximization theory. Yields are simulated using temperature, precipitation and soil quality data with various commercial crops and potential new cellulosic biomass crops. Three types of alternative crop management scenarios are simulated by varying crop rotation, fertilization and tillage. The cost of transporting biomass to a specific demand location is obtained using road distances and bulk shipping costs from geographic information systems. The spatial mathematical programming model predicts the supply of biomass and implied environmental consequences for a landscape managed by representative, profit maximizing farmers. The model was applied and validated for simulation of cellulosic biomass supply in a 9-county region of southern Michigan. Results for 74 cropping systems simulated across 39 sub-watersheds show that crop residues are the first types of biomass to be supplied. Corn stover and wheat straw supply start at $21/Mg and $27/Mg delivered prices. Perennial bioenergy crops become profitable to produce when the delivered biomass price reaches $46/Mg for switchgrass, $118/Mg for grass mixes and $154/Mg for Miscanthus giganteus. The predicted effect of the USDA Biomass Conversion Assistance Program is to sharply reduce the minimum biomass price at which miscanthus would become profitable to supply. Compared to conventional crop production practices in the area, the EPIC-simulated environmental outcomes with crop residue removal include increased greenhouse gas emissions and reduced water quality through increased nutrient loss. By contrast, perennial cellulosic biomass crops reduced greenhouse gas emissions and improved water quality compared to current commercial cropping systems.

Events external to agriculture have set in motion the conditions for structural change in the marketing of corn in the U.S. These included a rapid increase in the price of crude oil from $40 per barrel to over $100 caused by hurricanes, geopolitical events, an increased global demand for energy from countries like China and India, and in December 2007, the U.S. raising the renewable fuel standards. The results of this research show that there could be significant changes in the historical utilization and marketing of corn in the U.S. The change in movement patterns provides one source of visible evidence that a structural change is underway.

Energy security and environmental concerns about global climate change have lead to recent growth in the use of bio-fuels in the U.S. Brazil currently exports a substantial share of its sugarcane based ethanol to the U.S. to support the growing demand for bio-fuels. However, U.S. policies that exogenously affect the bio-fuel sector confound the understanding of the multi-market impacts of a growing bio-fuel demand. Moreover, the various forms of government intervention in the bio-fuel economy leave researchers with unclear conclusions about the prospects for bio-fuels. The indirect effects on related agricultural markets from increased bio-fuels consumption and the subsequent land use changes driven by expanded feedstock production also require more attention. To improve the understanding of these issues, we examine the market implications in the international ethanol sector by analyzing the equilibrium effects of bio-fuels policies. Additionally, we investigate land use change implications of an expanding Brazilian ethanol sector. In particular, the potential for livestock intensification of Brazilian pasture land grazing systems is considered as a prospective pathway for releasing new land for expanding sugarcane cultivation. We consider the related trade-offs in the Brazilian agricultural sector and their implications for trade with the U.S.

In the corn ethanol industry, the ability of plants to obtain favorable prices through marketing decisions is considered important for their overall economic performance. Based on a panel of surveyed of ethanol plants we extend data envelopment analysis (DEA) to decompose the economic efficiency of plants into conventional sources (technical and allocative efficiency) and a new component we call marketing efficiency. The latter measure allows us to evaluate plants’ ability to contract favorable prices of corn and ethanol relative to spot market prices and its implications for their overall economic performance. Results show that plants are very efficient from a technical point of view. Dispersion in overall economic performance observed across units is mainly explained by differences in allocative and marketing sources. Our results are consistent with the view that plants with higher production volumes may perform better, in part, because they can secure more favorable prices through improved marketing performance. Plants also seem to achieve significant improvements in marketing performance through experience and learning-by-doing. These results are consistent with two facts; 1) economies of scale may not be the only reason behind the increase in the average size of plants in the ethanol industry and; 2) there might be incentives for horizontal consolidation across plants.

Describes the KDF

This page lists data identifying trends in flexible fuel vehicles (FFVs), fuel efficiency, and how fleets are using alternative fuel vehicles (AFVs).

Ethanol Industry Outlooks from past years are made available by the renewable Fuels Association. The reports include the latest trends,developments happening with regard to the ethanol industry.

The Federal Trade Commision performs a market concentration analysis of the ethanol production industry to determine whether there is sufficient competition among industry participants to avoid price-setting and other anticompetitive behaviour.The FTC must report its findings to Congress and to the
Administrator of the Environmental Protection Agency. This link presents the FTC’s
concentration analysis of ethanol production up to year 2009.

This is an overview of transportation issues facing a rapidly expanding U.S. ethanol industry in the context of the U.S. corn market—currently the main source of ethanol production in the United States. The aim of the report is to present a frame of reference as the ethanol industry continues to grow and additional transportation benchmarks and indicators develop by providing analysis of transportation requirements for corn-based ethanol and its impact on grain transportation.