Brownfield, MO
10-26-06
ISU to study impacts of more energy production from agriculture
by Jerry Passer
The Center for Agricultural and Rural Development (CARD) at Iowa State
University (ISU) has received $275,000 in research funding from USDA. The
money will be used to provide estimates of the impact on farmers, consumers
and international trade from increased energy production from agriculture.
“The research is critical for national leaders who are making decisions about
investments in renewable fuels,” said Bruce Babcock, director of CARD and
professor of economics. “Right now people are asking how high the price of corn
is going to go and what higher corn prices mean for the competitiveness of U.S
livestock producers and our ability to meet export demand. The research will help
provide answers to these questions.”
Currently, estimates of how much energy can be obtained from agriculture
sources are based simply on projections of trends and estimates of current and
planned biofuel facilities. The approach taken by CARD analysts and
collaborators will be to calculate the breakeven prices of energy feedstock’s and
then use these prices to determine the amount of feedstock that will be produced
in the long run.
For example, for any given price of crude oil, the expected market value for
unleaded gasoline can be calculated. The analysts can find the market price that
would make E85 ethanol an equal substitute to gasoline for flex-fuel vehicle
owners. Using this ethanol price, they can calculate the corn price that ethanol
facilities can pay while still covering their costs of production. They can estimate
how much corn U.S. agriculture would produce at the given corn price.
The analysts intend to estimate supply curves for cellulosic feedstock and
biodiesel derived from oilseeds, as well as for corn-based ethanol. The resulting
information should be useful in determining which agricultural energy sources
would be profitable to develop under a given set of incentives and energy prices
and which resources would not be profitable for energy development under those
conditions.
The project also includes an assessment of how shifts of agricultural
commodities to energy sources might affect trade and what the implications may
be of financial involvement in ethanol and biodiesel facilities for income and
employment in rural America.