IDEAS home Printed from https://ideas.repec.org/p/ags/aaea10/61235.html

The Economic Feasibility of Energy Sugar Beet Biofuel Production in Central North Dakota

Author

Listed:
  • Maung, Thein A.
  • Gustafson, Cole R.

Abstract

This study examines the financial feasibility of producing ethanol biofuel from sugar beets in central North Dakota. Under the Energy Independence and Security Act (EISA) of 2007, biofuel from sugar beets uniquely qualifies as an “advanced biofuel”. EISA mandates production of 15 billion gallons of advanced biofuels annually by 2022. A stochastic simulation financial model was calibrated with irrigated sugar beet data from central North Dakota to determine economic feasibility and risks of production for a 10MGY (million gallon per year) and 20MGY ethanol plant. Study results indicate that feedstock costs, which include sugar beets and beet molasses, account for more than 70% of total production expenses. The estimated breakeven ethanol price for the 20MGY plant is $1.52 per gallon and $1.71 per gallon for the 10MGY plant. Breakeven prices for feedstocks are also estimated and show that the 20MGYplant can tolerate greater ethanol and feedstock price risk than the 10MGY plant. Our results also show that one of the most important factors that affect investment success is the price of ethanol. At an ethanol price of $1.84 per gallon, and assuming other factors remain unchanged, the estimated net present value (NPV) of the 20MGY plant is $41.54 million. By comparison, the estimated NPV of the 10MGY plant is only $8.30 million. Other factors such as changes in prices of co-products and utilities have a relatively minor affect on investment viability.

Suggested Citation

  • Maung, Thein A. & Gustafson, Cole R., 2010. "The Economic Feasibility of Energy Sugar Beet Biofuel Production in Central North Dakota," 2010 Annual Meeting, July 25-27, 2010, Denver, Colorado 61235, Agricultural and Applied Economics Association.
    • Handle: RePEc:ags:aaea10:61235
    DOI: 10.22004/ag.econ.61235
    as

    Download full text from publisher

    File URL: https://ageconsearch.umn.edu/record/61235/files/AAEA-Article050110.pdf
    Download Restriction: no
    File URL: https://libkey.io/10.22004/ag.econ.61235?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    References listed on IDEAS

    as
    1. Outlaw, Joe L. & Ribera, Luis A. & Richardson, James W. & Silva, Jorge da & Bryant, Henry & Klose, Steven L., 2007. "Economics of Sugar-Based Ethanol Production and Related Policy Issues," Journal of Agricultural and Applied Economics, Cambridge University Press, vol. 39(2), pages 357-363, August.
    2. Zibin Zhang & Luanne Lohr & Cesar Escalante & Michael Wetzstein, 2009. "Ethanol, Corn, and Soybean Price Relations in a Volatile Vehicle-Fuels Market," Energies, MDPI, vol. 2(2), pages 1-20, June.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Almohammed, Fouad & Mhemdi, Houcine & Vorobiev, Eugène, 2016. "Pulsed electric field treatment of sugar beet tails as a sustainable feedstock for bioethanol production," Applied Energy, Elsevier, vol. 162(C), pages 49-57.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Leucci, A. C. & Ghinoi, S. & Sgargi, D. & Wesz, V. J., Jr., 2013. "Variation and links among food and energy international prices. An analysis through VAR models from 2000 to 2012," 2013 Second Congress, June 6-7, 2013, Parma, Italy 149923, Italian Association of Agricultural and Applied Economics (AIEAA).
    2. Chia-Lin Chang & Yiying Li & Michael McAleer, 2018. "Volatility Spillovers between Energy and Agricultural Markets: A Critical Appraisal of Theory and Practice," Energies, MDPI, vol. 11(6), pages 1-19, June.
    3. Natanelov, Valeri & McKenzie, Andrew M. & Van Huylenbroeck, Guido, 2013. "Crude oil–corn–ethanol – nexus: A contextual approach," Energy Policy, Elsevier, vol. 63(C), pages 504-513.
    4. Hongli Feng & Chad Hart, 2010. "Willingness To Pay For Surplus Sugar In The United States," Contemporary Economic Policy, Western Economic Association International, vol. 28(3), pages 429-437, July.
    5. Zhang, Dengjun & Asche, Frank & Oglend, Atle, 2014. "Ethanol and trade: An analysis of price transmission in the US market," Energy Economics, Elsevier, vol. 42(C), pages 1-8.
    6. Wetzstein, M. & Wetzstein, H., 2011. "Four myths surrounding U.S. biofuels," Energy Policy, Elsevier, vol. 39(7), pages 4308-4312, July.
    7. Cheng, Sheng & Cao, Yan, 2019. "On the relation between global food and crude oil prices: An empirical investigation in a nonlinear framework," Energy Economics, Elsevier, vol. 81(C), pages 422-432.
    8. Ladislav Kristoufek & Karel Janda & David Zilberman, 2013. "Regime-dependent topological properties of biofuels networks," The European Physical Journal B: Condensed Matter and Complex Systems, Springer;EDP Sciences, vol. 86(2), pages 1-12, February.
    9. Gardebroek, Cornelis & Hernandez, Manuel A., 2013. "Do energy prices stimulate food price volatility? Examining volatility transmission between US oil, ethanol and corn markets," Energy Economics, Elsevier, vol. 40(C), pages 119-129.
    10. Mensi, Walid & Tiwari, Aviral & Bouri, Elie & Roubaud, David & Al-Yahyaee, Khamis H., 2017. "The dependence structure across oil, wheat, and corn: A wavelet-based copula approach using implied volatility indexes," Energy Economics, Elsevier, vol. 66(C), pages 122-139.
    11. Palma, Marco A. & Richardson, James W. & Roberson, Brad E. & Ribera, Luis A. & Outlaw, Joe L. & Munster, Clyde, . "Economic Feasibility of a Mobile Fast Pyrolysis System for Sustainable Bio-crude Oil Production," International Food and Agribusiness Management Review, International Food and Agribusiness Management Association, vol. 14(3), pages 1-16.
    12. Chia-Lin Chang & Michael McAleer & Yu-Ann Wang, 2016. "Modelling volatility spillovers for bio-ethanol, sugarcane and corn," Documentos de Trabajo del ICAE 2016-03, Universidad Complutense de Madrid, Facultad de Ciencias Económicas y Empresariales, Instituto Complutense de Análisis Económico.
    13. Dalheimer, Bernhard & Herwartz, Helmut & Lange, Alexander, 2021. "The threat of oil market turmoils to food price stability in Sub-Saharan Africa," Energy Economics, Elsevier, vol. 93(C).
    14. Algieri, Bernardina, 2014. "The influence of biofuels, economic and financial factors on daily returns of commodity futures prices," Energy Policy, Elsevier, vol. 69(C), pages 227-247.
    15. Pavla BLAHOVA & Karel JANDA & Ladislav KRISTOUFEK, 2014. "The perspectives for genetically modified cellulosic biofuels in the Central European conditions," Agricultural Economics, Czech Academy of Agricultural Sciences, vol. 60(6), pages 247-259.
    16. Chang, Chia-Lin & McAleer, Michael & Wang, Yu-Ann, 2018. "Modelling volatility spillovers for bio-ethanol, sugarcane and corn spot and futures prices," Renewable and Sustainable Energy Reviews, Elsevier, vol. 81(P1), pages 1002-1018.
    17. Morris, Brittany D. & Richardson, James W. & Frosch, Brian J. & Outlaw, Joe L. & Rooney, William L., "undated". "Economic Feasibility of Ethanol Production from Sweet Sorghum Juice in Texas," 2009 Annual Meeting, January 31-February 3, 2009, Atlanta, Georgia 46852, Southern Agricultural Economics Association.
    18. Saiful Izzuan Hussain & Steven Li, 2022. "Dependence structure between oil and other commodity futures in China based on extreme value theory and copulas," The World Economy, Wiley Blackwell, vol. 45(1), pages 317-335, January.
    19. Stewart, Shamar L. & Isengildina Massa, Olga, 2024. "Food & Oil Price Volatility Dynamics: Insights from a TVP-SVAR-DCC-MIDAS Model," 2024 Annual Meeting, July 28-30, New Orleans, LA 343936, Agricultural and Applied Economics Association.
    20. Karel Janda & Ladislav Kristoufek & David Zilberman, 2012. "Biofuels: policies and impacts," Agricultural Economics, Czech Academy of Agricultural Sciences, vol. 58(8), pages 372-386.

    More about this item

    Keywords

    ;
    ;

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:ags:aaea10:61235. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: AgEcon Search (email available below). General contact details of provider: https://edirc.repec.org/data/aaeaaea.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.