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Evaluation of Breakeven Farm-gate Switchgrass Prices in South Central North Dakota

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  • Bangsund, Dean A.
  • DeVuyst, Eric A.
  • Leistritz, F. Larry

Abstract

Switchgrass, a warm-season perennial grass, native to the region, has received considerable interest for its potential role as a dedicated feedstock for cellulosic-based bio-fuels. This research examined the farm-gate price needed for switchgrass to provide per-acre net returns equal to those obtained from traditional crops in south central North Dakota. Future production costs for switchgrass and net returns from traditional crops were estimated for three soil productivity classes and also were developed to reflect the historical revenue and cost patterns associated with producers who are typically more or less profitable (i.e., average net return per acre) than regional averages. Prices were calculated using an annualized equivalent analysis of switchgrass production costs and net returns from traditional crops from 2008 through 2017. Switchgrass production costs ranged from just over $40 per ton on marginal soils to $34.80 per ton on highly productive soils. Breakeven switchgrass prices across the three soil productivity classes ranged from $47 per ton in the low productivity soils to $76 per ton in the most productive soils. Production costs for low-profit producers were estimated at $47 per ton, compared to the regional average of $37.50 per ton. Switchgrass production costs for the remaining profitability groups ranged from about $33.50 per ton to about $36.75 per ton. The breakeven farm-gate price for switchgrass ranged from $56 per ton for the two lowest profitability groups to over $94 per ton for the most profitable producers. A key economic criterion influencing the breakeven price for switchgrass will be the foregone net revenue from displaced traditional crops. On marginal soils, just under one-third of the breakeven price was derived from the level of foregone net returns from traditional crops; whereas, over 80 percent of the breakeven price was derived from the level of foregone net returns from traditional crops on the most productive soils. As net returns from traditional crops decreased, the more that breakeven switchgrass prices approached production costs for switchgrass. Under current conditions of high input costs, escalating transportation costs, and given the increases in net returns from traditional crops, switchgrass, as a feedstock to a cellulosic ethanol plant, will be more expensive than previously estimated.

Suggested Citation

  • Bangsund, Dean A. & DeVuyst, Eric A. & Leistritz, F. Larry, 2008. "Evaluation of Breakeven Farm-gate Switchgrass Prices in South Central North Dakota," Agribusiness & Applied Economics Report 37845, North Dakota State University, Department of Agribusiness and Applied Economics.
  • Handle: RePEc:ags:nddaae:37845
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    File URL: http://purl.umn.edu/37845
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    Cited by:

    1. Fewell, Jason E. & Bergtold, Jason S. & Williams, Jeffery R., 2016. "Farmers' willingness to contract switchgrass as a cellulosic bioenergy crop in Kansas," Energy Economics, Elsevier, vol. 55(C), pages 292-302.
    2. Lynes, Melissa K. & Bergtold, Jason S. & Williams, Jeffery R. & Fewell, Jason E., 2012. "Determining Farmers’ Willingness-To-Grow Cellulosic Biofuel Feedstocks on Agricultural Land," 2012 Annual Meeting, August 12-14, 2012, Seattle, Washington 124777, Agricultural and Applied Economics Association.
    3. Fewell, Jason E. & Bergtold, Jason S. & Williams, Jeffery R., 2011. "Farmers’ Willingness to Grow Switchgrass as a Cellulosic Bioenergy Crop: A Stated Choice Approach," 2011 Annual Meeting, June 29-July 1, 2011, Banff, Alberta, Canada 109776, Western Agricultural Economics Association.
    4. Lynes, Melissa K. & Bergtold, Jason S. & Williams, Jeffery R. & Fewell, Jason E., 2016. "Willingness of Kansas farm managers to produce alternative cellulosic biofuel feedstocks: An analysis of adoption and initial acreage allocation," Energy Economics, Elsevier, vol. 59(C), pages 336-348.
    5. Krah, Kwabena & Petrolia, Daniel & Coble, Keith & Williams, Angelica & Harri, Ardian, 2015. "Producer Preferences for Contracts on a Risky Bioenergy Crop," 2015 Annual Meeting, January 31-February 3, 2015, Atlanta, Georgia 196994, Southern Agricultural Economics Association.
    6. Rosburg, Alicia Sue, 2012. "Essays concerning the cellulosic biofuel industry," ISU General Staff Papers 201201010800003732, Iowa State University, Department of Economics.

    More about this item

    Keywords

    switchgrass; production costs; farm-gate price; North Dakota; soil productivity; Agribusiness; Crop Production/Industries; Production Economics;

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