Expected Changes in Farm Landscape with the Introduction of a Biomass Market

This study examines how the introduction of dedicated energy crops—switchgrass and forage sorghum—may affect Arkansas’ crop allocation decisions. The study captures crop production practices at the county or crop reporting district level. Results are in a static equilibrium framework and limited to a one-year ahead forecast. The model’s predictive success was evaluated by comparing 2007 model results with no energy crop production to actual acreages harvested. Switchgrass entered land use at approximately $25 and $35/dry ton in 2007 and 2008, respectively. Higher 2008 commodity prices for traditional crops caused lower switchgrass acreage peaks compared to 2007. Further, at higher biomass price levels—$45 to $55/dry ton depending on year and whether or not land charges were applied—the annual energy crop, forage sorghum, surpassed switchgrass acreage primarily as a result of its higher yield. Since acreage supply response is quite elastic, biorefineries will be exposed to significant price risk, especially at higher biomass prices, when the annual energy crop exceeds perennial switchgrass in acreage. Finally, the study examined impacts of biomass production on resource use. Regardless of ownership scenario, in 2007 and 2008, a 13 and 10 percent reduction, respectively, in irrigation water per acre occurred when the price of switchgrass increases from $25 to $65. Labor and fuel use showed no such trends. This is a significant finding, given diminishing water resources for a large portion of the Arkansas crop producing region.