corn stover economic considerations

Extension and Outreach/Department of Economics

Corn Stover Economic ConsiderationsIntegrated Crop Management Conference

Ames, IowaNovember 29, 2012

Chad Hart and William EdwardsDepartment of Economics

Iowa State University


Renewable Fuels Standard (RFS)

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Conventional Biofuels Cellulosic BiofuelsBiodiesel Additional Advanced Biofuels

Extension and Outreach/Department of EconomicsSource: NREL


Cellulosic Biofuel is a New Market As a new market, there is uncertainty

about many aspects of production and trade

What are the revenues/costs of biofuel and feedstock production?

How will these revenues/costs flow through the supply chain?


Contract Legally binding agreement to exchange

goods or services for a payment

Outlines the risk-return tradeoff between buyers and sellers

Often addresses the major benefits/challenges of the trade


Essential Elements for Producer Participation in Biomass Markets

Darren H. Jarboe, Bobby J. Martens, M. Mainul Hoque, and Georgeanne M. Artz

Iowa State University

Survey conducted in 2011 Sent to 2,250 Iowa crop producers farming

50 acres or more


Biofuels Knowledge

Source: Jarboe, et al. 2011


Interest in Supplying Biomass



Soil and Residue Management



Producer ChallengesChallenge Average RatingNutrient loss 5.55Distance to markets 5.52Long-term biomass market viability 5.44Biomass price volatility 5.26Soil erosion issues 5.19Percent of biomass removed 5.13In-field transport and compaction 5.00Contract opt-out clauses 4.99Contract terms of storage 4.93Residue management 4.92



Brief Outline of 2012 DCE Contract

Harvest 2 dry tons per acre$7.50 per bale$1.50 per acre if not harvestedBales moved to field edge within a weekBales moved from field edge by March 2013

DCE covers harvest, transportation, and storage costs


Pricing Corn StoverAdded costs to seller (minimum price to accept)•Harvesting and transporting (unless buyer does this)•Nutrient replacement•Reduced tillage? (cost saved)•Yield effect?

Value to buyer (maximum price to pay)•Tied to price of gas and oil (ethanol use)•Tied to prices of alternative feedstuffs (feed use)

For trade to occur, the price must be between these values.


Ag Decision Maker file A1-70,”Estimating a Value for Corn Stover”

http://www.extension.iastate.edu/agdm/crops/html/a1-70.html

http://www.extension.iastate.edu/agdm/crops/html/a1-70.html


Added Costs to Seller

• Harvesting costs (custom rates, $/acre)– Chopping stalks $11.05– Raking $ 6.20– Baling ($11.50 / bale x 4 bales/ac) $46.00– Transport (20 mi.@$.25/mi/bale x4) $20.00– Total $83.25


Nutrient removal per ton of dry matter – 5.9 lb. P @ $.53 $ 3.13– 25.0 lb. K @ $.55 $13.75 $16.88 / dry ton X 80% dry matter $13.50 /wet ton x .6 wet tons/bale x 4 bales/ac = $32.40/acre+ harvesting costs $83.25/acre Total cost per acre $115.62 Cost per wet ton (80% d.m.) $ 48.19 /ton


Maximum Price to Offer(value of feedstuffs replaced)

• 1.16 tons grass/legume hay per ton of stover @$125 $145.00

• minus .22 tons of distillers grains @$260 $ 57.20

$ 87.80/t. stover

Price range = $48.19 to $87.80


Price for Ethanol Feedstock

• Maximum price depends on value of crude oil, other feedstocks, gasoline, etc.

• If processor does the harvesting, producer needs to cover added fertility costs, only.

• Example: $13.40 per wet ton $32.40 per acre


Relevant Trading Range

• Buyer and seller can bargain between the maximum and minimum

• If the minimum price > maximum price, it is not economical to use the stover


Some Guidance on Pricing


Cleanliness of stover

Yield impacts of stover removal?

Less tillage needed?

Compaction?

Time needed for fall tillage and fertilizer?

Source: Darr, et al. 2012

Other Items to Consider


Thank you for your time!

Any questions?

Ag Decision Maker:http://www.extension.iastate.edu/agdm/

corn stover economic considerations

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