Forecasting Profits and Production Feasibility of Emerging North Carolina Energy Crops

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Title: Forecasting Profits and Production Feasibility of Emerging North Carolina Energy Crops
Author: Rizzon, Dominick Brian
Advisors: Dr. Kelly Zering, Committee Member
Dr. Matthew Veal, Committee Chair
Dr. Gary Roberson, Committee Member
Abstract: The role of mechanized equipment to collected, harvest, and pre-process biomass represents the first stages of the biomass logistics system. The expense to operate these systems along with the costs of crop inputs will determine which energy crop systems, machine systems, cultivation practices, and harvest systems are feasible to turn a profit for bioenergy. In North Carolina there is a high degree of diversity pertaining to agricultural production; therefore, it is important to consider the entire range of bioenergy crops that can be produced as each crop could find a profitable situation in a state with such varied agricultural production. In North Carolina, all five of the major biomass catergories; cellulosic crops, oilseeds, crop residues, starch crops, and sugar crops can make specific contributions towards a sustainable energy market. However, it is difficult to assess which of these agricultural biomass crops would be the most profitable. In an effort to better understand how equipment and cultural management practice impact profitability of dedicated energy crop production, this investigation will look at how production scale and cultural practice impacts production costs. Machine systems have been grouped in 100, 200, 300, 400 horsepower classifications and their operating costs were calculated for cultivation on 250, 500, 1000, 2000, and 5000 acre production scales. Also, considered in this study was the effect of conventional tillage systems versus no-till production. . Using ASABE standards and machine prices from a variety of equipment manufacturers, the total production was calculated on a dollar per acre basis. Variable input costs were gathered for North Carolina Ag & Resource Economic Extension publications and were treated at constants for each horsepower size and farm size. Results showed that residues have the lowest production cost of $68 per acre becuase the only costs incurred are related to equipment operation and additional crop inputs (i.e. fertilizer, seed, etc) are not required.. Oil and Starch crops have similar production costs that range from $200 per acre to $500 per acre. Cellulosic crops like switchgrass, coastal bermudagrass, and miscanthus ranged from $350 per acre to $800 per acre. The higher prices are generally associated with unbalanced equipment horsepower-cultivation area situations, such as a 400 hp tractor used to cultivate 250 ac of land. For some crops, the higher production costs can be justified because market conditions as well as anticipated yields are sufficient to cover these higher operating costs. Corn is perhaps the best example. Other crops such as miscanthus, have limited market opportunities and require relatively inefficient, specialized equipment like sprig planters making these crops less profitable. The 250 acre farms show little chance of generating a profit for any systems analyzed in this analysis. Biomass for energy tends to rely on high output of low value material and the 250 ac land base is not sufficient to support a dedicated agricultural enterprise, Custom hiring operations and the use of smaller horsepower equipment for some maintanence operations would make these farms competitive. All energy crop systems showed it is possible to generate a profit if 1000 acres of dedicated energy crops are cultivated. This assumes a yield which was equal biomass yields and market prices were equivalent to the preceding ten year averages. After testing significance, using acreage, tillage type, crop type, and horsepower class as independent variables and production cost as the dependent variable, it was determined that the all main effects were significant, but only two interaction effects were significant. Perhaps the most telling result of this study is energy crops that are tied to current agricultural markets, such as corn, soybeans, and wheat may be the most profitable because of established markets, agricultural equipment systems, and cultural management routines. However, these crops are also most likely to be more volatile due to their highly variable commodity markets and global demand. More novel crops such as sweet sorghum, show potential but the lack of efficient, dedicated harvesting equipment has a negative impact on profitability. Therefore, this study seems to indicate that under current conditions energy crops which match-up with current agricultural production systems (i.e. switchgrass is produced like any other hay crop) while having few additional market opportunities besides energy provide the efficiency, cost constraints, and yields necessary to insure a sustainable biomass-to-energy industry in the state.
Date: 2009-12-03
Degree: MS
Discipline: Biological and Agricultural Engineering

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