What to Consider with Cellulosic Biomass Harvest Daniel OBrien & Troy Dumler Extension Agricultural Economists Ron Madl, BIVAP Director K-State Research

What to Consider with What to Consider with Cellulosic Biomass Cellulosic Biomass

HarvestHarvest

Daniel O’Brien & Troy DumlerDaniel O’Brien & Troy DumlerExtension Agricultural Extension Agricultural

EconomistsEconomists

Ron Madl, BIVAP DirectorRon Madl, BIVAP Director

K-State Research and ExtensionK-State Research and Extension

2009 Kansas Wheat District Seminars

A Decision Making Model for A Decision Making Model for Cellulosic Biomass ContractsCellulosic Biomass Contracts

Effort funded by Kansas Wheat-KAWGEffort funded by Kansas Wheat-KAWG• K-State, Oklahoma State & NRCS working togetherK-State, Oklahoma State & NRCS working together

PurposePurpose: To develop a biomass : To develop a biomass contract sales decision making model contract sales decision making model for Farmers for Farmers

– To help Kansas Farmers determine whether To help Kansas Farmers determine whether it is profitable to sell their crop biomass on it is profitable to sell their crop biomass on contract for cellulosic ethanol productioncontract for cellulosic ethanol production

Key Biomass Contract Key Biomass Contract IssuesIssues

Allowable Crop Residue Removal Allowable Crop Residue Removal (NRCS)(NRCS)

– Prevention of Wind & Water ErosionPrevention of Wind & Water Erosion

Biomass Contract Income, Terms Biomass Contract Income, Terms (Company)(Company)

Farmer’s Baling-Handling-Storage CostsFarmer’s Baling-Handling-Storage Costs

Crop Nutrient Losses from Biomass Crop Nutrient Losses from Biomass HarvestHarvest

(Potential)(Potential) Soil Moisture Losses from Soil Moisture Losses from Residue Cover Removal Residue Cover Removal Yield/$ Losses Yield/$ Losses

OtherOther: : In-Field Storage Area, Carbon Trading...In-Field Storage Area, Carbon Trading...

A Partial Budget Approach A Partial Budget Approach to Economic Decisions:to Economic Decisions:

BenefitsBenefits Less Less Costs Costs = Profitability= Profitability

BenefitsBenefits CostsCosts

A. Revenue A. Revenue IncreasesIncreases C. Revenue C. Revenue DecreasesDecreases

B. Cost B. Cost DecreasesDecreases D. Cost D. Cost IncreasesIncreases

Total Benefits (A + B)Total Benefits (A + B) Total Costs (C + D)Total Costs (C + D)

Biomass Contract Biomass Contract SpecificationsSpecifications

Abengoa Contract Terms, January 2009Abengoa Contract Terms, January 20091-Time Signup bonus1-Time Signup bonus $1.00 $1.00

/acre/acre

Yearly Biomass Reservation Yearly Biomass Reservation PaymentPayment

$0.50 $0.50 /acre/acre

Biomass Contract Base PaymentBiomass Contract Base Payment $2.00 $2.00 /acre/acre

Biomass Production Payment Biomass Production Payment (option)(option)

$5.00 $5.00 /ton/ton

Nutrient Removal Replacement Nutrient Removal Replacement (option)(option)

$8.00 $8.00 /ton/ton

Residue baled & removed by Residue baled & removed by Company Company (option)(option)

AA. Revenue . Revenue IncreasesIncreases

Biomass Acreage Payments:Biomass Acreage Payments:– Signup Payment:Signup Payment: $1.00 /acre$1.00 /acre– Annual Reservation Payments:Annual Reservation Payments: $0.50 /acre$0.50 /acre

Biomass Base Contract Payment Biomass Base Contract Payment $2.00 /acre$2.00 /acre

Biomass Production Payment Biomass Production Payment $5.00 /ton$5.00 /ton

Compensation for Crop Nutrient RemovalCompensation for Crop Nutrient Removal– @ Estimated Replacement Cost@ Estimated Replacement Cost $8.00 /ton $8.00 /ton

In-Field Storage Site & Carbon Credit Payments?In-Field Storage Site & Carbon Credit Payments?

BB. Cost . Cost DecreasesDecreases

In-Field Baled Biomass Storage Site (?)In-Field Baled Biomass Storage Site (?)

– Effect of non-producing acres used for in-Effect of non-producing acres used for in-field storage would be “field storage would be “proratedprorated” over all ” over all acres from which biomass was harvestedacres from which biomass was harvested

– Decreased crop expenses:Decreased crop expenses: $/acre$/acre

CC. Revenue . Revenue DecreasesDecreases

Wind & Water Erosion Wind & Water Erosion Yield Effects Yield Effects– NRCS determines allowable biomass harvest NRCS determines allowable biomass harvest – Impact accumulates over time Impact accumulates over time $/acre$/acre

Soil Moisture Depletion Caused by Crop Soil Moisture Depletion Caused by Crop Residue Removal Residue Removal Crop Yield Effects Crop Yield Effects Crop Income from soil moisture loss Crop Income from soil moisture loss $/acre$/acre

In-Field Storage Site Crop Losses In-Field Storage Site Crop Losses $/acre$/acre

Carbon Credits (undefined) Carbon Credits (undefined) $/acre $/acre

DD. Cost . Cost IncreasesIncreases

Farmer’s Biomass Harvest, Baling & Farmer’s Biomass Harvest, Baling & Handling CostsHandling Costs– Farmer vs Contractor responsibilities for Farmer vs Contractor responsibilities for

biomass harvest-handling operations biomass harvest-handling operations $/acre$/acre

Crop Nutrient Replacement CostsCrop Nutrient Replacement Costs Fertilizer costs to replace nutrients lost in Fertilizer costs to replace nutrients lost in

crop stover/biomass removal crop stover/biomass removal $/acre$/acre

In-Field Storage Site Preparation CostIn-Field Storage Site Preparation Cost $/acre$/acre

Biomass ProductionBiomass Production

Figuring Crop Stover ProductionFiguring Crop Stover ProductionCrop YieldCrop Yield (bushels per acre)(bushels per acre)

x Crop Weightx Crop Weight (pounds per bushel)(pounds per bushel)

x Stover Production Efficiencyx Stover Production Efficiency (lb stover / lb grain)(lb stover / lb grain) = Stover Production= Stover Production (pounds per acre)(pounds per acre)

Stover Production EfficiencyStover Production Efficiency– Corn & Milo:Corn & Milo: 1.00 1.00 lb Stover / lb Feedgrainlb Stover / lb Feedgrain

– Wheat:Wheat: 1.67 1.67 lb Stover / lb Wheatlb Stover / lb Wheat

– Soybeans:Soybeans: 0.75 0.75 lb Stover / lb Soybeanslb Stover / lb Soybeans

Biomass Production Biomass Production EstimatesEstimates

CornCorn(Irrig)(Irrig)

WheaWheatt

MiloMilo(Irrig)(Irrig)

Crop Yield Crop Yield (bu/ac)(bu/ac) 200 200 bubu 45 45 bubu 125 125 bubu

Test Weight Test Weight (lb/bu)(lb/bu) 56 56 lblb 60 60 lblb 56 56 lblb

Stover Prdn. Stover Prdn. Efficiency Efficiency (lb. Stover / lb. (lb. Stover / lb. Grain)Grain)

1.001.00 1.671.67 1.001.00

Pounds Pounds ofof Stover Stover (lb/acre)(lb/acre)

11,20011,200 4,5004,500 7,0007,000

Tons Tons ofof Stover Stover (tons/acre)(tons/acre)

5.6 5.6 tt 2.25 2.25 tt 3.5 3.5 tt

Corn Stover for Biomass HarvestCorn Stover for Biomass Harvest200 bu Irrig., 1.00 Stover Production Efficiency200 bu Irrig., 1.00 Stover Production Efficiency

ScenariScenarioo

Residue Residue ProductioProductio

nn

lbs/acrelbs/acre

Residue Residue HarvesteHarveste

dd

lbs/acrelbs/acre


dd

tons/acretons/acre

Residue Residue RemaininRemainin

gg

%%

AA 11,20011,200 1,0001,000 0.500.50 ton ton 91 91 %%

BB 11,20011,200 2,0002,000 1.001.00 ton ton 82 82 %%

CC 11,20011,200 3,0003,000 1.501.50 ton ton 73 73 %%

DD 11,20011,200 4,0004,000 2.002.00 ton ton 64 64 %%

EE 11,20011,200 5,0005,000 2.502.50 ton ton 55 55 %%

Wheat Straw for Biomass Wheat Straw for Biomass HarvestHarvest

45 bu, 1.67 Stover Production Efficiency45 bu, 1.67 Stover Production Efficiency

ScenariScenarioo


nn

lbs/acrelbs/acre


dd

lbs/acrelbs/acre


dd

tons/acretons/acre


gg

%%

AA 4,5004,500 500500 0.250.25 ton ton 89 89 %%

BB 4,5004,500 1,0001,000 0.500.50 ton ton 78 78 %%

CC 4,5004,500 1,5001,500 0.750.75 ton ton 67 67 %%

DD 4,5004,500 2,0002,000 1.001.00 ton ton 56 56 %%

EE 4,5004,500 2,5002,500 1.251.25 ton ton 44 44 %%

Milo Stover for Biomass HarvestMilo Stover for Biomass Harvest125 bu Irrig., 1.00 Stover Production Efficiency125 bu Irrig., 1.00 Stover Production Efficiency

ScenariScenarioo


nn

lbs/acrelbs/acre


dd

lbs/acrelbs/acre


dd

tons/acretons/acre


gg

%%

AA 7,0007,000 500500 0.250.25 ton ton 93 93 %%

BB 7,0007,000 1,0001,000 0.500.50 ton ton 86 86 %%

CC 7,0007,000 1,5001,500 0.750.75 ton ton 79 79 %%

DD 7,0007,000 2,0002,000 1.001.00 ton ton 71 71 %%

EE 7,0007,000 2,5002,500 1.251.25 ton ton 64 64 %%

Crop Nutrients Removed Crop Nutrients Removed from Biomass Harvestfrom Biomass Harvest

Crop NutrientCrop Nutrient Corn/Corn/MiloMilo

Lbs /ton Lbs /ton

of stoverof stover

WheatWheatLbs /ton Lbs /ton

of stoverof stover

SoybeaSoybeann

Lbs /ton Lbs /ton

of stoverof stover

Nitrogen (N)Nitrogen (N) 17 lb17 lb 11 lb11 lb 17 lb17 lb

Phosphorous Phosphorous (P(P22OO55))

4 lb4 lb 3 lb3 lb 3 lb3 lb

Potassium (KPotassium (K22O)O) 50 lb50 lb 15 lb15 lb 13 lb13 lb

Sulfur (S)Sulfur (S) 3 lb3 lb 2 lb2 lb 2 lb2 lb

Value of Removed N & PValue of Removed N & P22OO55

82-0-0 @ $650/ton, 11-52-0 @ $510/ton82-0-0 @ $650/ton, 11-52-0 @ $510/ton

Residue Removal RatesResidue Removal Rates

CropCrop 1 Lg Sq Bale1 Lg Sq Bale1,659 lb / acre1,659 lb / acre

2 Lg Sq Bales2 Lg Sq Bales3,318 lb / acre3,318 lb / acre

Corn & MiloCorn & Milo$6.86 $6.86 / ton of / ton of stoverstover

$5.69 $5.69 / acre/ acre $11.38 $11.38 / acre/ acre

WheatWheat$4.56 $4.56 / ton of / ton of stoverstover

$3.79 $3.79 / acre/ acre $7.57 $7.57 / acre/ acre

Farmers’ Stover Harvesting, Farmers’ Stover Harvesting, Handling & Storage CostsHandling & Storage Costs

In-Field OperationsIn-Field Operations– Chopping Stalks ? Chopping Stalks ? – Raking Stover ?Raking Stover ?– Swathing Stover?Swathing Stover?– Baling (Large Square vs Large Round Baling (Large Square vs Large Round

Bales) ?Bales) ?– Hauling to edge of the Field ?Hauling to edge of the Field ?– Short-term Storage of Bales at edge of Short-term Storage of Bales at edge of

Field ?Field ?

Custom Rates Used for Cost Estimates Custom Rates Used for Cost Estimates

Crop Yield Losses from Crop Yield Losses from Decreased Soil MoistureDecreased Soil Moisture

In Grain Producing Stages of Growth, 1 In Grain Producing Stages of Growth, 1 inch of available water produces…inch of available water produces…– 12 bu. of 12 bu. of CornCorn per acre per acre– 11 bu. of 11 bu. of Grain SorghumGrain Sorghum (Milo)(Milo) per acre per acre– 5 bu. of 5 bu. of WheatWheat per acre per acre

$Value of 1 inch H$Value of 1 inch H220 in deficit conditions0 in deficit conditions– Corn: Corn: $42 /acre$42 /acre @ $3.50 /bu. @ $3.50 /bu.– Milo: Milo: $35 /acre$35 /acre @ $3.15 /bu @ $3.15 /bu– Wheat: Wheat: $25 /acre$25 /acre @ $5.00 /bu. @ $5.00 /bu.

3 Irrigation Moisture-Yield 3 Irrigation Moisture-Yield ScenariosScenarios

1)1) Excess Irrigation CapacityExcess Irrigation Capacity• Crop residue provides no benefit to Crop residue provides no benefit to

crops in suppressing soil water lossescrops in suppressing soil water losses

2)2) Increased Irrigation ApplicationIncreased Irrigation Application• Crop residue saves water, reducing Crop residue saves water, reducing

irrigation needs irrigation needs No effect on YieldsNo effect on Yields

3)3) Deficit Soil Water SuppliesDeficit Soil Water Supplies• Crop water needs exceed soil moisture Crop water needs exceed soil moisture

plus irrigation plus irrigation Lower YieldsLower Yields

Irrigation Moisture-Yield ImpactsIrrigation Moisture-Yield Impacts$ Impact of “Increased” & “Deficit” Scenarios$ Impact of “Increased” & “Deficit” Scenarios

2)2) ““Increased Irrigation” ScenarioIncreased Irrigation” Scenario• $Impact =$Impact = Cost to applied added water Cost to applied added water

$5.80/acre inch of water $5.80/acre inch of water (KSU pumping cost est.)(KSU pumping cost est.)

x Inches per acre of additional water appliedx Inches per acre of additional water applied

3)3) ““Deficit Soil Water” ScenarioDeficit Soil Water” Scenario• $Impact =$Impact = $Value of lost crop $Value of lost crop

productionproductionDeficit Water (inches/acre water deficit) Deficit Water (inches/acre water deficit) x Yield response (bushels/acre/inch of water)x Yield response (bushels/acre/inch of water)

xx Crop Price ($/bushel)Crop Price ($/bushel)

2 Dryland Moisture-Yield 2 Dryland Moisture-Yield ScenariosScenarios

1)1) Adequate Soil MoistureAdequate Soil Moisture• Crop residue provides no benefit to Crop residue provides no benefit to

crops in suppressing soil water lossescrops in suppressing soil water losses

2)2) Deficit Soil Moisture SuppliesDeficit Soil Moisture Supplies• Crop water needs exceed soil Crop water needs exceed soil

moisture reserves plus rainfall moisture reserves plus rainfall Lower YieldsLower Yields

Dryland Moisture-Yield ImpactsDryland Moisture-Yield Impacts$ Impact of “Adequate” & “Deficit” Scenarios$ Impact of “Adequate” & “Deficit” Scenarios

1)1) ““Adequate Moisture” ScenarioAdequate Moisture” Scenario• No $Impact of Crop Residue removalNo $Impact of Crop Residue removal

2)2) ““Deficit Soil Water” ScenarioDeficit Soil Water” Scenario• $Impact =$Impact = $Value of lost crop $Value of lost crop

productionproductionDeficit Water (inches/acre water deficit) Deficit Water (inches/acre water deficit)

x Yield response (bushels/acre/inch of water)x Yield response (bushels/acre/inch of water)

xx Crop Price ($/bushel)Crop Price ($/bushel)

Irrigated Corn Stover ScenarioIrrigated Corn Stover ScenarioAssumptionsAssumptions

• Center Pivot SystemCenter Pivot System (125 acres of corn) (125 acres of corn)

• YieldsYields:: 200 bushels/acre 200 bushels/acre

• Corn$Corn$:: $3.50 /bushel $3.50 /bushel

• Farmer OperationFarmer Operation:: Raking of stover only Raking of stover only

• ““Increased Irrigation” Scenario:Increased Irrigation” Scenario: +1 acre inch +1 acre inch

• Harvested StoverHarvested Stover (2 Scenarios) (2 Scenarios)– 1 Lg Sq Bale / acre (0.83 tons stover /acre)1 Lg Sq Bale / acre (0.83 tons stover /acre)

– 2 Lg Sq Bales / acre (1.66 tons stover /acre)2 Lg Sq Bales / acre (1.66 tons stover /acre)

Irrigated Corn Stover Scenario Irrigated Corn Stover Scenario

#1#1Preliminary results: 1 Lg Sq Bale (0.83 Preliminary results: 1 Lg Sq Bale (0.83

tons) / acretons) / acreBenefitsBenefits CostsCostsA. Revenues A. Revenues IncreasesIncreases

Reservation Payment Reservation Payment $2.50 /a$2.50 /a

Biomass Payment Biomass Payment $4.15 /a$4.15 /a

Nutrient Compensation Nutrient Compensation $6.64 /a$6.64 /a

C. Revenue C. Revenue DecreasesDecreases

Crop Yield Losses Crop Yield Losses (1” H(1” H22O)O) $5.80 /a$5.80 /a

Storage Site Income loss Storage Site Income loss $0.36 /a$0.36 /a


Harvest, handling, etc. Harvest, handling, etc. $4.21 /a$4.21 /a

Nutrient Replacement Nutrient Replacement $5.69 /a$5.69 /a

Total Benefits: $13.28 Total Benefits: $13.28 /a/a

Total Costs: Total Costs: $16.06 /a$16.06 /a

Net: ($3.28) /acre

Irrigated Corn Stover Scenario Irrigated Corn Stover Scenario

#2#2Preliminary results: 2 Lg Sq Bale (1.66 tons) / Preliminary results: 2 Lg Sq Bale (1.66 tons) /

acreacreBenefitsBenefits CostsCostsA. Revenues A. Revenues IncreasesIncreases












Net: +$2.32 /acre

Dryland Wheat Straw ScenarioDryland Wheat Straw ScenarioAssumptionsAssumptions

• Nonirrigated QuarterNonirrigated Quarter (160 acres of wheat) (160 acres of wheat)



• Farmer OperationFarmer Operation:: Raking of straw only Raking of straw only

• ““Deficit Water” Scenario:Deficit Water” Scenario: (-1) acre inch (-1) acre inch

• Harvested StrawHarvested Straw (2 Scenarios) (2 Scenarios)– 0.5 Lg Sq Bale / acre (0.41 tons straw /ac)0.5 Lg Sq Bale / acre (0.41 tons straw /ac)

– 1.0 Lg Sq Bales / acre (0.83 tons straw /ac)1.0 Lg Sq Bales / acre (0.83 tons straw /ac)

Dryland Wheat Straw Scenario Dryland Wheat Straw Scenario

#1#1Preliminary results: 0.5 Lg Sq Bale (0.41 Preliminary results: 0.5 Lg Sq Bale (0.41

tons) / actons) / acBenefitsBenefits CostsCostsA. Revenues A. Revenues IncreasesIncreases










Total Benefits: Total Benefits: $7.89 /a$7.89 /a


Net: ($23.57) /acre

Dryland Wheat Straw Scenario Dryland Wheat Straw Scenario














Net: ($20.07) /acre

Irrigated Milo Stover ScenarioIrrigated Milo Stover ScenarioAssumptionsAssumptions

• Center Pivot SystemCenter Pivot System (125 acres of milo) (125 acres of milo)



• Farmer OperationFarmer Operation:: Raking of stover only Raking of stover only

• ““Increased Irrigation” Scenario:Increased Irrigation” Scenario: +1 acre inch +1 acre inch

• Harvested StoverHarvested Stover (2 Scenarios) (2 Scenarios)– 0.5 Lg Sq Bale / acre (0.41 tons stover /ac)0.5 Lg Sq Bale / acre (0.41 tons stover /ac)

– 1.5 Lg Sq Bales / acre (1.24 tons stover /ac)1.5 Lg Sq Bales / acre (1.24 tons stover /ac)

Irrigated Milo Stover Scenario Irrigated Milo Stover Scenario












Total Benefits: Total Benefits: $7.89 /a$7.89 /a


Net: ($8.17) /acre

Irrigated Milo Stover Scenario Irrigated Milo Stover Scenario














Net: ($3.07) /acre

A Continuing Process…A Continuing Process… Decision Model completed by June 30, Decision Model completed by June 30,

20092009

Team Effort Team Effort

– K-State Research and Extension StaffK-State Research and Extension Staff Troy Dumler – Ext. Ag Economist @ SW KansasTroy Dumler – Ext. Ag Economist @ SW Kansas Ron Madl – Director of BIVAP @ K-StateRon Madl – Director of BIVAP @ K-State Norm Klocke – Irrigation Engineer @ SW KansasNorm Klocke – Irrigation Engineer @ SW Kansas Deann Presley – Soil & Environmental AgronomistDeann Presley – Soil & Environmental Agronomist Michael Langemeier – Agricultural EconomistMichael Langemeier – Agricultural Economist

– Natural Resource Conservation Service (NRCS)Natural Resource Conservation Service (NRCS)

– Oklahoma State UniversityOklahoma State University

Questions???Questions???

Comments???Comments???

Visit the AgManager Website for Visit the AgManager Website for

K-State Agricultural Economics K-State Agricultural Economics

ExtensionExtension

www.AgManager.infowww.AgManager.info

Documents

What to Consider with Cellulosic Biomass Harvest Daniel OBrien & Troy Dumler Extension Agricultural Economists Ron Madl, BIVAP Director K-State Research