Biomass Crop and Ethanol Supply From Agricultural Lands in the United States with Methodology, Estimation Results, and State-by-State Simulations

Paul W. Gallagher and Hosein Shapouri

ISU General Staff Papers from Iowa State University, Department of Economics

Abstract: We estimated the biomass crop supply from U.S. farmland, accounting for the contribution of marginal lands, gauging effects of removing income support programs, and returning some Conservation Reserve Program (CRP) land where biomass production can be sustained. We excluded biomass yield growth because we believe the infrastructure to sustain this growth is not in place. We estimate that 484 million tons of biomass could be brought into production, with 176 million tons on cropland and the remainder coming from marginal Q farmland. However, it could talce a.decade with sustained high biomass prices to induce the necessary reallocation of farmland resources. Presently, the land-value effects of existing programs may deter the adoption of biomass processing technologies. Cropland policies more conducive to biomass expansion are reviewed.The ethanol market analysis sketches some plausible market developments that could influence the adoption of biomass ethanol (BE). That is, a com-ethanol (CE) industry expansion has pushed CE costs up to the point where BE could be competitive. Still, the new entrant, BE, would likely compete with narrow profit margins in the commodity fuel market. But the equilibrium with impending technology suggests ethanol output of 45 billion gallons, or about one-third of U.S. gasoline consumption. However, removing the ethanol subsidy would reduce profitability to near the competitive margin, even if anticipated processing yields for BE occur in the intermediate term. Justifications for retaining the ethanol subsidy are reviewed.

Date: 2008-11-01
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