Corn Stover Economic Considerations Iowa Corn Stover Harvest
- Slides: 23
Corn Stover: Economic Considerations Iowa Corn Stover Harvest Meeting Dubuque, Iowa March 6, 2013 Chad Hart and William Edwards Department of Economics Iowa State University Extension and Outreach/Department of Economics
Renewable Fuels Standard (RFS) Extension and Outreach/Department of Economics
Source: NREL Extension and Outreach/Department of Economics
Cellulosic Biofuel is a New Market Ø There is much uncertainty about many aspects of production and trade. Ø What are the revenues/costs of biofuel and feedstock production? Ø How will these revenues/costs flow through the supply chain? Ø To whom will the revenues and costs accrue? Extension and Outreach/Department of Economics
Soil and Residue Management Source: Jarboe, et al. 2011 Extension and Outreach/Department of Economics
Producer Challenges Challenge Average Rating Nutrient loss 5. 55 Distance to markets 5. 52 Long-term biomass market viability 5. 44 Biomass price volatility 5. 26 Soil erosion issues 5. 19 Percent of biomass removed 5. 13 In-field transport and compaction 5. 00 Contract opt-out clauses 4. 99 Contract terms of storage 4. 93 Residue management 4. 92 Source: Jarboe, et al. 2011 Extension and Outreach/Department of Economics
Ag Decision Maker file A 1 -70, ”Estimating a Value for Corn Stover” Extension and Outreach/Department of Economics
Pricing Corn Stover Added costs to seller (minimum price to accept) • Harvesting and transporting (unless buyer does it) • Nutrient replacement • Reduced tillage? (costs saved) • Yield effect? Value to buyer (maximum price to pay) • Ethanol use: tied to price of gas and oil • Feed use: tied to prices of alternative feedstuffs For trade to occur, the price must be between these values. Extension and Outreach/Department of Economics
Costs to Seller (custom rates) Assume 2 tons of 80% dry matter stover harvested per acre, or four 1, 250 -pound bales) Harvesting costs $/acre – Chopping stalks – Raking – Baling ($11. 50 / bale x 4 bales/ac) – Collecting ($3. 75 / bale x 4 bales) – Transport (20 mi. @ $. 25/mi/bale) – Total Extension and Outreach/Department of Economics $11. 40 $ 6. 25 $46. 80 $15. 00 $20. 00 $99. 45/ac.
Costs to Seller (variable costs only, including labor) Harvesting costs, $/acre (variable costs) – Chopping stalks – Raking – Baling (including twine) – Collecting – Transporting($3. 65/ton x 2. 5 tons) – Total Based on m. s. thesis by Kevin Peyton, 2012. Extension and Outreach/Department of Economics $ 9. 84 $ 5. 31 $15. 21 $ 4. 25 $ 9. 12 $43. 73/ac.
Nutrient removal per ton of dry matter – 5. 9 lb. P @ $. 48 – 25. 0 lb. K @ $. 50 (ISU Pm 1688) X 2 tons/acre (dry matter) + harvesting costs (custom) Total cost per acre Cost per wet ton (2. 5 t /acre) Cost per bale Extension and Outreach/Department of Economics $ 2. 83 $12. 50 $15. 33 / dry ton ` $30. 66 / acre $99. 45 / acre $130. 11 $ 52. 04 / ton $ 32. 53 / bale
Nutrient removal per ton of dry matter – 5. 9 lb. P @ $. 48 – 25. 0 lb. K @ $. 50 (ISU Pm 1688) X 2 tons/acre (dry matter) $ 2. 83 $12. 50 $15. 33 / dry ton $30. 66 / acre + harvesting costs (variable) Total cost per acre Cost per wet ton (2. 5 t /acre) Cost per bale $43. 73 / acre $74. 39 $29. 76 / ton $18. 60 / bale Extension and Outreach/Department of Economics
Maximum Price to Offer = value of feedstuffs replaced per wet ton of stover fed 1. 16 tons grass/legume hay @$125 $145. 00 minus. 22 tons of DDGs @$260 - $ 57. 20 $ 87. 80/t $54. 88/bale Extension and Outreach/Department of Economics
Bargaining Range Seller’s Minimum Per wet ton $52. 04 to Per bale (1, 250 lb) $32. 53 to Extension and Outreach/Department of Economics Buyer’s Maximum $87. 80 $54. 88
Market Price at Iowa Auctions (USDA Hay Market News) January: $56 - $72 per ton $35 - $45 per large round bale Price transported to auction. Purity likely lower than needed for biofuels. Extension and Outreach/Department of Economics
Bargaining Range Seller’s Buyer’s Minimum Maximum Per wet ton $52. 04 to $87. 80 Iowa auction prices $56 - $72 Per bale (1, 250 lb) $32. 53 to $54. 88 Iowa auction prices $35 - $45 Extension and Outreach/Department of Economics
Price for Ethanol Feedstock • If processor does the harvesting, producer needs to cover added fertility costs, only. Example: $19. 16 per wet ton $30. 66 per acre • Maximum price depends on value of crude oil, other feedstocks, gasoline, processing costs, etc. Extension and Outreach/Department of Economics
Some Guidance on Pricing Extension and Outreach/Department of Economics
Other Items to Consider Ø Cleanliness of stover? Source: Darr, et al. 2012 Ø Yield impacts of stover removal? Ø Less tillage needed? Ø Compaction? Ø Time needed for fall tillage and fertilizer? Extension and Outreach/Department of Economics
Commodity Contract Ø Legally binding agreement to exchange a future commodity for a payment. Ø Major points to discuss • Nature of product • Quantity of product • Quality of product • Pricing formula • Timing of exchange • Location of exchange Extension and Outreach/Department of Economics
Farm Lease: Who Owns the Stover? Iowa Code 562. 5 A “Unless otherwise agreed to in writing by a lessor and farm tenant, a farm tenant may take any part of the aboveground part of a plant associated with a crop, at the time of harvest of after harvest, until the farm tenancy terminates as provided in this chapter. ” Extension and Outreach/Department of Economics
Lease Considerations • Cash rent lease: tenant has paid expenses, can sell stover as part of the crop. • Need to agree on how much to remove. • Potential stover income may impact the rental rate. • Flexible cash lease: include stover sales in gross revenue? • Crop share lease: split stover revenue Extension and Outreach/Department of Economics
Thank you for your time! Any questions? Ag Decision Maker web site: http: //www. extension. iastate. edu/agdm/ Extension and Outreach/Department of Economics
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