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Biomass Crop and Ethanol Supply from Agricultural Lands in the United States with Methodology, Estimation Results, and State-by-State Simulations

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  • Gallagher, Paul W.
  • Shapouri, Hosein

Abstract

We estimated the biomass crop supply from U.S. farmland, accounting for the contribution of marginal lands, gauging effects of removing income support programs, and returning some Conservation Reserve Program (CRP) land where biomass production can be sustained. We excluded biomass yield growth because we believe the infrastructure to sustain this growth is not in place. We estimate that 484 million tons of biomass could be brought into production, with 176 million tons on cropland and the remainder coming from marginal farmland. However, it could take a decade with sustained high biomass prices to induce the necessary reallocation of farmland resources. Presently, the land-value effects of existing programs may deter the adoption of biomass processing technologies. Cropland policies more conducive to biomass expansion are reviewed. The ethanol market analysis sketches some plausible market developments that could influence the adoption of biomass ethanol (BE). That is, a corn-ethanol (CE) industry expansion has pushed CE costs up to the point where BE could be competitive. Still, the new entrant, BE, would likely compete with narrow profit margins in the commodity fuel market. But the equilibrium with impending technology suggests ethanol output of 45 billion gallons, or about one-third of U.S. gasoline consumption. However, removing the ethanol subsidy would reduce profitability to near the competitive margin, even if anticipated processing yields for BE occur in the intermediate term. Justifications for retaining the ethanol subsidy are reviewed.

Suggested Citation

  • Gallagher, Paul W. & Shapouri, Hosein, 2008. "Biomass Crop and Ethanol Supply from Agricultural Lands in the United States with Methodology, Estimation Results, and State-by-State Simulations," Agricultural Economic Reports 308485, United States Department of Agriculture, Economic Research Service.
    • Handle: RePEc:ags:uerser:308485
    DOI: 10.22004/ag.econ.308485
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    References listed on IDEAS

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    1. Paul Gallagher & Donald Johnson, 1999. "Some New Ethanol Technology: Cost Competition and Adoption Effects in the Petroleum Market," The Energy Journal, International Association for Energy Economics, vol. 0(Number 2), pages 89-120.
    2. Gallagher, Paul W. & Shapouri, Hosein & Price, Jeffrey & Schamel, Guenter & Brubaker, Heather, 2003. "Some Long-Run Effects of Growing Markets and Renewable Fuel Standards on Additives Markets and the U.S. Ethanol Industry," Staff General Research Papers Archive 10648, Iowa State University, Department of Economics.
    3. Dean T. Chen & Shoichi Ito, 1992. "Modeling Supply Response with Implicit Revenue Functions: A Policy-Switching Procedure for Rice," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 74(1), pages 186-196.
    4. Paul W. Gallagher & Daniel M. Otto & Mark Dikeman, 2000. "Effects of an Oxygen Requirement for Fuel in Midwest Ethanol Markets and Local Economies," Review of Agricultural Economics, Agricultural and Applied Economics Association, vol. 22(2), pages 292-311.
    5. Gallagher, Paul & Johnson, Donald, 1999. "Some New Ethanol Technology: Cost Competition and Adoption Effects in the Petroleum Market," ISU General Staff Papers 199901010800001274, Iowa State University, Department of Economics.
    6. Gallagher, Paul W. & Shapouri, H. & Graboski, M., 2002. "Usda's 1998 Ethanol Cost-Of-Production Survey," Staff General Research Papers Archive 10243, Iowa State University, Department of Economics.
    7. Gallagher, Paul W. & Dikeman, Mark & Fritz, John & Wailes, Eric J. & Gauthier, Wayne M. & Shapouri, Hosein, 2003. "Biomass From Crop Residues: Cost And Supply Estimates," Agricultural Economic Reports 34063, United States Department of Agriculture, Economic Research Service.
    8. Gallagher, Paul W. & Johnson, Donald, 1999. "Some New Ethanol Technology: Cost Competition and Adoption Effects in the Petroleum Market," Staff General Research Papers Archive 5265, Iowa State University, Department of Economics.
    9. Gallagher, Paul W. & Otto, Daniel & Dikeman, Mike, 2000. "Effects of an Oxygen Requirement for Fuel in Midwest Ethanol Markets and Local Economies," Staff General Research Papers Archive 5244, Iowa State University, Department of Economics.
    10. Gallagher, Paul W. & Shapouri, Hosein & Price, Jeffrey & Schamel, Guenter & Brubaker, Heather, 2003. "Some long-run effects of growing markets and renewable fuel standards on additives markets and the US ethanol industry," ISU General Staff Papers 200309010700001445, Iowa State University, Department of Economics.
    11. Hallam, Arne & Anderson, I. C. & Buxton, D. R., 2001. "Comparative Economic Analysis of Perennial, Annual and Intercrops for Biomass Production," Staff General Research Papers Archive 5076, Iowa State University, Department of Economics.
    12. Paul C. Westcott, 1991. "Planting Flexibility and Land Allocation," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 73(4), pages 1105-1115.
    13. Gallagher, Paul W. & Dikeman, Mike & Fritz, J. & Wailes, Eric J. & Gauthier, W. & Shapouri, H., 2003. "Biomass from Crop Residues: Some Cost and Supply Estimates," Staff General Research Papers Archive 10240, Iowa State University, Department of Economics.
    14. Gallagher, Paul W. & Schamel, Guenter & Shapouri, Hosein, 2002. "Some Cost and Price Analysis for the Corn Processing Sector," Staff General Research Papers Archive 10241, Iowa State University, Department of Economics.
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    Cited by:

    1. Gallagher, Paul W., 2014. "The regional effects of a biomass fuel industry on US agriculture," Energy Policy, Elsevier, vol. 69(C), pages 598-609.

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