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

Untreated soybean seed Heartland Coop
Seed/BiotechMarrone Bio Innovations, Groundwork BioAg Bio-stacked Microbial Seed Treatments Result In Increased Yields
February 13, 2017
Marrone Bio Innovations, Inc. and Groundwork BioAg, Ltd have announced successful seed treatment field trials of the world’s first all-biological Read More
Fertilizer Storage
Crop InputsThe State Of The Fertilizer Industry
February 9, 2017
He’s all hat, no horse.” It’s a humorous way of describing a person who tells a good story, but is Read More
Corn Field
InsecticidesArysta LifeScience, DuPont Collaborate On Rynaxpyr Premix Formulations
February 8, 2017
Arysta LifeScience recently announced that it has entered into a global collaboration with DuPont Crop Protection for the development of Read More
World Agri-Tech Innovation Summit Panel 2016
Crop InputsWorld Agri-Tech Innovation Summit To Be Held In San Francisco
February 8, 2017
“Breakthrough Applications and Business Models for Sustainable Farming” is the theme of the World Agri-Tech Innovation Summit to be held Read More
Trending Articles
Farmer and aptop
Matt Hopkins10 Warning Signs Your Website Is Grossly Outdated
February 8, 2017
Your Website is often a visitor’s first impression of your ag retail business. A positive first impression can set the Read More
AgriSync
Matt Hopkins17 Agriculture Apps That Will Help You Farm Smarter In 2017
December 9, 2016
Ag professionals are working smarter, not harder, than ever before. Smart farming technologies have enabled them to reduce costs, maximize Read More
R4023 Sprayer, John Deere
CropLife 100Ag Retail Equipment Report: The Green Party Continues
December 7, 2016
In the annual race for sales in the ag retail equipment marketplace, the color schemes for participants are a little Read More
Mike Stern
Precision AgClimate Corp. CEO Talks Retailer Support For Digital Ag
December 1, 2016
CropLife Magazine’s sister publication, AgriBusiness Global, recently sat down with Mike Stern, CEO of The Climate Corp., following the Monsanto subsidiary’s Read More
Precision AgTrimble Debuts End-to-End FMIS Platform
November 28, 2016
October’s inaugural PrecisionAg Vision Conference left this author with many thoughts and things to ponder in the coming months. Probably Read More
CHS Primeland
CropLife 100The 2016 CropLife 100 Report: Reviewing The Many Bulls And Bears Impacting This Year’s Marketplace
November 28, 2016
For virtually all of 2016, the nation was wholly focused on the big Presidential election. Some folks aligned themselves with Read More
Latest News
Roy Blunt
LegislationARA Recognizes Blunt, Heitkamp For Legislative Efforts …
February 17, 2017
Agricultural industry continues to face federal regulatory challenges. Thankfully, agriculture’s allies in the U.S. Senate stepped forward. The Agricultural Retailers Read More
LegislationThe Fertilizer Institute Commends Senate On Confirmatio…
February 17, 2017
The Fertilizer Institute (TFI) President Chris Jahn issued the following statement on the Senate confirmation of Oklahoma Attorney General Scott Read More
Trump, Senate, Cabinet
LegislationBREAKING: Trump EPA Nominee Scott Pruitt Confirmed by S…
February 17, 2017
Scott Pruitt, who as Oklahoma’s attorney general spent years suing the Environmental Protection Agency over its efforts to regulate various Read More
ManagementFebruary Road Trip Edition
February 17, 2017
Editors Paul Schrimpf and Eric Sfiligoj discuss their recent visits to Indiana and Kentucky. Read More
Heritage Cooperative Finished Building Aerial
ManagementHeritage Cooperative, Agland Co-op Approve Merger
February 17, 2017
Agland Co-op and Heritage Cooperative stockholders have both approved the merger agreement between Agland Co-op and Heritage Cooperative. Now begins Read More
LegislationARA Fly-In: Ag Retail Descends on Capitol Hill, Lawmake…
February 15, 2017
More than 100 agricultural retailers, distributors and suppliers headed to Capitol Hill Tuesday morning for the Agribusiness Congressional Fly-in, according to a Read More
Untreated soybean seed Heartland Coop
Seed/BiotechMarrone Bio Innovations, Groundwork BioAg Bio-stacked M…
February 13, 2017
Marrone Bio Innovations, Inc. and Groundwork BioAg, Ltd have announced successful seed treatment field trials of the world’s first all-biological Read More
NL5000 With G5 Technology
SpreadersNew Leader Introduces NL5000 Dry Nutrient Applicator Wi…
February 13, 2017
New Leader, a division of Highway Equipment Company (HECO), has announced the next generation of spreading technology with the NL5000 Read More
Fertilizer Storage
Crop InputsThe State Of The Fertilizer Industry
February 9, 2017
He’s all hat, no horse.” It’s a humorous way of describing a person who tells a good story, but is Read More
CropLife 100Pinnacle Agriculture Agrees To Credit Agreement Amendme…
February 9, 2017
Pinnacle Operating Corp. has entered into an amendment (the “Amendment”) to its First Lien Credit Agreement that will provide for, Read More
ManagementUpdates on Upcoming Trips, Dow-DuPont, and the Des Moin…
February 9, 2017
Editors Paul Schrimpf and Eric Sfiligoj review a few future travels, along with the latest on big company mergers and Read More
Championship Tractor Pull
EquipmentNational Farm Machinery Show Highlighted By Championshi…
February 9, 2017
The scream of monster engines, the stench of burning rubber and the ground-pounding vibrations of the country’s largest, loudest and Read More
Farmer and aptop
Matt Hopkins10 Warning Signs Your Website Is Grossly Outdated
February 8, 2017
Your Website is often a visitor’s first impression of your ag retail business. A positive first impression can set the Read More
Corn Field
InsecticidesArysta LifeScience, DuPont Collaborate On Rynaxpyr Prem…
February 8, 2017
Arysta LifeScience recently announced that it has entered into a global collaboration with DuPont Crop Protection for the development of Read More
Industry NewsThe Fertilizer Institute Board Elects New Chairman, Vic…
February 8, 2017
The Fertilizer Institute’s (TFI) Board of Directors has elected Chuck Magro, President and CEO of Agrium, and Tony Will, President Read More
Sonny Perdue
ManagementARA Joins More Than 600 Organizations In Support Of Per…
February 8, 2017
The Agricultural Retailers Association (ARA) recently joined with more than 600 agricultural groups on a letter of support for Governor Read More
World Agri-Tech Innovation Summit Panel 2016
Crop InputsWorld Agri-Tech Innovation Summit To Be Held In San Fra…
February 8, 2017
“Breakthrough Applications and Business Models for Sustainable Farming” is the theme of the World Agri-Tech Innovation Summit to be held Read More
Cedar Country Cooperative
Eric SfiligojConsolidation In Agriculture: More Middle Movement
February 7, 2017
If you’ve regularly followed my column, you know I’m something of a movie junkie. Like many, one of my favorite Read More