Opportunities and Opportunities and Challenges of Challenges of Expanding Expanding Agriculture’s Agriculture’s Contribution to the Contribution to the Energy SupplyEnergy Supply

Daniel G. De La Torre UgarteDaniel G. De La Torre UgarteUniversity of TennesseeUniversity of Tennessee

ObjectivesObjectives

Assess the feasibility and impacts of a significant expansion of bioenergy sector.

Identify the opportunities and challenges.

Renewable Energy FeedstocksRenewable Energy Feedstocks

Renewable Energy

Electricity Biodiesel Ethanol

WindSolar

PV and Thermal

Land Fill Gas Agriculture

Agriculture Agriculture

Hydro

Renewable Energy

Electricity Biodiesel Ethanol

Cattle Manure

ResiduesCorn, Wheat

Dedicated Energy Crops

Digester Dairy, Poultry, Hogs

Mill Wastes

Forest Residues

Oilseed Crops

Yellow Grease

TallowBeef and Poultry

Corn

Residues Corn and Wheat

Dedicated Energy Crops

Forest Residues

Food

Mill Wastes

Renewable Energy Feedstocks Renewable Energy Feedstocks From AgricultureFrom Agriculture

Hypothetical Ethanol DemandHypothetical Ethanol Demand

50 Billion

Assumptions for a Potential OutlookAssumptions for a Potential Outlook• Yields:

• Major crops continue w/ trend line• Energy crops (6 to12 dt/acre)

• Farm practices: Increase use of no-till and reduced till

• Land: Use cropland only

• Baseline: Extended 2005 USDA Baseline

• Commodity Programs: as specified in 2005

Feedstock for EnergyFeedstock for Energy**

0

200

400

600

800

2006 2011 2016

Million Tons

Corn Grain Corn Stover Wheat Straw Energy Crop Wood Residue Soybeans* Does not include forest harvest

Land UseLand Use2006, 2015, and 2020 2006, 2015, and 2020 (million acres)

81 85.5 83.4

73.8 70.3 67.4

58.5 58.4 57

27.2 33.262.8

62.8 62.8

56.244.3 42.5

33.931.7 31.5

0

100

200

300

400

2006 2015 2020

Corn Soybeans Wheat

Energy Crops Hay Pasture

Other Crops

Corn

Soybeans

Wheat

Energy Crop

Hay

Other

Cropland in Pasture

Average Commodity PricesAverage Commodity Prices

2006 2015 2020Corn ($/bu) 2.28 2.56 2.70Baseline 2.15 2.42 2.33Soybeans ($/bu) 4.67 6.52 6.97Baseline 4.60 5.62 5.38Wheat ($/bu) 3.06 3.86 3.53Baseline 3.05 3.57 3.49Cotton ($/lb) 0.45 0.58 0.58Baseline 0.45 0.54 0.55Energy Crop ($/dt) na 48.68 53.00

Tons

Distribution of the Production Distribution of the Production of Cellulosic Materials, 2010of Cellulosic Materials, 2010

Tons

Distribution of the Production Distribution of the Production of Cellulosic Materials, 2020of Cellulosic Materials, 2020

ChangesChanges in Net Returns and in Net Returns and Government PaymentsGovernment Payments (million $)(million $)

The OpportunitiesThe Opportunities

• Agriculture can face a long period of sustain expansion in demand.

• Bio-energy feedstocks could be a new $12 billion industry (net returns).

•Great potential for rural development

• Savings in government payments of $6 to $50 billion.

Key ChallengesKey Challenges Food Security

Transformation of industrial livestock production Positive contribution to food security

Environmental Sustainable feedstock production Protection of tropical forests

Social Who will accrue the benefits of the “new ethanol

industry”? What benefits for Rural America? What role for international trade?

ConclusionsConclusions America’s agriculture can play a key

role in energy supply without impacting food security

An expanding Bioenergy industry could produce: Increased Farm Income Reduced Government Payments Increased Rural Economic Development Enhanced Environmental Benefits Reduction in Foreign Oil Dependency

HOW this potential is pursued matters: social and environmental impacts

Agricultural Policy Analysis Centerhttp://agpolicy.org/

Bio-based Energy Analysis Grouphttp://beag.ag.utk.edu/

Department of Agricultural Economics, Institute of AgricultureUniversity of Tennessee http://www.agriculture.utk.edu/