4 Economic Hurdles To Cellulosic-Based Biofuels

Apart from the basic problem of market size potential, there is a more fundamental problem in the development of cellulosic-based biofuels. It is simple economics.

In the November CropLife issue, Sano Shimoda, founder and president of BioScience Securities, discussed the four economic ag-related hurdles to the development of a sustainable/commercially viable cellulosics biofuel industry. They are:

•  Feedstock Costs. Despite the large quantity of ag residues, feedstock prices will be high. Ag residue has significant economic value to the grower: soil fertility, reduced erosion, maintaining fertility and structure, and retaining moisture. In addition, the amount of ag residue that can be safely removed, without impairing the above factors, could vary quite dramatically from field to field. Early commercial development will require sizable subsidy payments to growers, beyond a typical $20 to $30 per ton price for baled ag residue. It is quite possible that ag residue such as corn stover might be priced at costs greater than $50 to $75 per ton.

In addition, market competition from the recognition that ag residue is to be valued as a co-product could result in much higher prices. Value could also be influenced by competition from new developing uses such as BioPower (biomass-fired power plants).

•  Harvesting, Transportation, Supply Logistics. It has long been recognized that the harvesting and supply logistics of dealing with high volume and bulky ag residues will be costly, whether the biorefinery system is centralized or not. While many companies are working on prototypes, new harvesting equipment has to be commercialized and new transportation/supply/storage logistics/facilities will have to be built. It is clear that growers will look at incremental net revenues (less any costs incurred) derived from the sale of ag residues. However, given the weather dependent uncertainty over the fall harvest window, growers will not want to slow down for ag residue removal. Also, ag residue removal could increase soil compaction — a negative for crop growth and yields in the following growing season.

•  Supply Risks. Some biomass sources such as municipal solid waste negate the need for large volume storage facilities. On the other hand, ag residues are produced once a year (energy crops, which are perennials, have the advantage of potential multiple harvests during the years). In contrast to corn, there is need to develop a massive broad area storage infrastructure for ag residues, whose storage conditions have to be controlled to minimize deterioration in quality. What is underestimated is the need for additional emergency supply reserves to ensure availability should adverse weather conditions reduce local supply availability.

•  New Business Models. Unlike major row crops, there is the question as to whether futures markets for major ag residues can be developed to reduce financial risks. Otherwise, new business models, possibly multi-year contracts, will have to be developed to provide revenue/profit visibility for the grower and cellulosic biofuels producer, as well as security of supply for commercial operations.

– Full Report: Ethanol’s Future — A Perspective

Topics: ,

Leave a Reply

Crop Inputs Stories

Corn Seed
Seed/BiotechSeed Innovations Benefit All of the Seed Industry
August 17, 2017
Innovations from throughout the seed industry help address many of the economic, environmental and health issues we face as a Read More
AcreEdge bag
Seed/BiotechLandus Cooperative’s AcreEdge Seed Brand Gears Up for 2018
August 17, 2017
Growers in more than 26 Iowa and Minnesota counties are seeing field signs with a new brand name at end Read More
Soybeans weeds
HerbicidesOngoing Evaluation Key to Controlling Weeds, Improving Yield in Soybeans
August 10, 2017
As the sun bears down on record U.S. soybean acres this August, farmers keep their eyes on their fields to Read More
Young Corn Plants
Seed/BiotechMycogen Seeds Offers Novel Product to Battle Pythium, Other Pathogens
August 10, 2017
After a season plagued by seedling diseases caused by cool, wet soils at planting, farmers have a new option to Read More
Trending Articles
Iowa waterways
Stewardship2,600 Iowa Farmers Commit $8.7 Million to Water Quality Practices
August 9, 2017
Iowa Secretary of Agriculture Bill Northey announced Tuesday that a record number of Iowa farmers signed up to install nutrient Read More
Greg Musson, Gar Tootelian
CropLife 100Cause of Gar Tootelian Fire Under Investigation
August 7, 2017
Over one hundred firefighters and equipment responded to a four-alarm shop fire at the Gar Tootelian, Inc. (GAR) facility in Read More
Rob Versprille
ManagementCeres Solutions, North Central Co-op Merger to Bring New Opportunities for Indiana, Michigan Farmers
August 1, 2017
More than 40,000 customers and almost 9,000 Indiana and Michigan farmers will begin doing business with the new Ceres Solutions Read More
CPS-Norwood-and-Dupont-reps
Eric SfiligojA Message to Ag Retailers: Do Tell Your Good Stories
July 26, 2017
As the daughter of a peanut farmer, Krysta Harden, Chief Sustainability Officer for DuPont Crop Protection, understands the importance ag Read More
Tim Hassinger Dow AgroSciences President and CEO
Crop InputsDow’s Tim Hassinger Named President, CEO of Lindsay Corp.
July 24, 2017
Lindsay Corp. has  announced the appointment of Timothy Hassinger as president and CEO and a member of its board of Read More
Stewardship‘Gonna Fly Now’ with Environmental Respect
July 20, 2017
One of the most memorable moments in movie history occurred in the Academy Award-winning 1976 film “Rocky.” Haven gotten his Read More
Latest News
RoGator RG1300B AGCO
EquipmentAGCO Opens Nominations for 12th Annual Operator of the …
August 18, 2017
AGCO Corp. has announced the opening of nominations for AGCO Application Equipment’s 12th Annual Operator of the Year. The award Read More
ManagementTravels, Mergers, and CropLife 100 Updates
August 18, 2017
Editors Paul Schrimpf and Eric Sfiligoj discuss recent trips they’ve taken, the latest news on market consolidation, and the 2017 Read More
Corn Seed
Seed/BiotechSeed Innovations Benefit All of the Seed Industry
August 17, 2017
Innovations from throughout the seed industry help address many of the economic, environmental and health issues we face as a Read More
SpreadersGVM to Introduce New Prowler at MAGIE
August 17, 2017
The newest Prowler in GVM’s line-up will be introduced next week at the Midwest Ag Industries Expo (MAGIE), August 23 Read More
AcreEdge bag
Seed/BiotechLandus Cooperative’s AcreEdge Seed Brand Gears Up for 2…
August 17, 2017
Growers in more than 26 Iowa and Minnesota counties are seeing field signs with a new brand name at end Read More
Engenia soybeans
ManagementCorn and Soybean Yield Forecasts Larger than Expected
August 17, 2017
The USDA’s August Crop Production report contained larger-than-expected forecasts for the 2017 U.S. corn and soybean crops. At 169.5 bushels Read More
ManagementU.S. Ag Secretary Introduces SCORE
August 17, 2017
U.S. Agriculture Secretary Sonny Perdue signed a new agreement to support new and beginning farmers. On August 5, Perdue joined Read More
CHS-FFA-Minnesota
CropLife 100CHS and FFA: A Homerun Partnership
August 17, 2017
CHS hosted the Minnesota FFA for its annual FFA night at CHS Field. FFA students, educators and CHS leadership enjoyed Read More
Greg Musson, Gar Tootelian
CropLife 100Gar Tootelian Foundation Donates Half Million Dollars t…
August 16, 2017
Students at Immanuel Elementary are looking forward to the first day of school for two reasons this year. One, they Read More
Water Drainage
StewardshipNew System Could Remove Two Water Pollutants from Ag Fi…
August 14, 2017
Algae blooms in the Gulf of Mexico use up the majority of the oxygen in the water, leading to massive Read More
Eric SfiligojThe Top 10 Crop Protection Companies, Post-Mega Mergers
August 14, 2017
Everyone loves a good Top 10 list. In fact, some prominent celebrities such as David Letterman spent much of their Read More
ManagementThe DuPont-Granular Deal, Dicamba Update, and Upcoming …
August 11, 2017
Matthew Grassi joins Paul Schrimpf for the second week in a row to talk about DuPont’s acquisition of Granular, as Read More
Soybeans weeds
HerbicidesOngoing Evaluation Key to Controlling Weeds, Improving …
August 10, 2017
As the sun bears down on record U.S. soybean acres this August, farmers keep their eyes on their fields to Read More
Young Corn Plants
Seed/BiotechMycogen Seeds Offers Novel Product to Battle Pythium, O…
August 10, 2017
After a season plagued by seedling diseases caused by cool, wet soils at planting, farmers have a new option to Read More
Corn Field
FertilizerProtect Applied Manure Straight From the Manure Pit to …
August 10, 2017
Farmers who use liquid manure to fertilize corn crops can now mix Instinct nitrogen stabilizer in their pit for easy Read More
Iowa waterways
Stewardship2,600 Iowa Farmers Commit $8.7 Million to Water Quality…
August 9, 2017
Iowa Secretary of Agriculture Bill Northey announced Tuesday that a record number of Iowa farmers signed up to install nutrient Read More
Natives-First-Purple_Prairie_Clover
Seed/BiotechLa Crosse Seed Continues Focus on Soil and Water Conser…
August 9, 2017
La Crosse Seed is doing its part to lead communication to ag retailers across the country on the importance of Read More
HerbicidesAg Secretary Perdue Comments on Dicamba Issue
August 9, 2017
Agriculture Secretary Sonny Perdue indicated to reporters this week that he would like to see the industry work out a Read More