Development of a viable corn stover market: Impacts on corn and soybean markets
Abstract
Renewable energy issues are a major topic in the U.S. with concerns on decreasing dependency on foreign oil and greenhouse gas emissions. Agricultural residues, such as corn stover, are a prospective feedstock for biofuel. If corn stover is removed in a sustainable method the potential use may be large. Research conducted by Thompson (2011) indicated that if a viable corn stover market existed, it could have a large impact on farmers' crop rotations and land allocation. The major objective of this research was to determine the impacts on corn and soybean production and markets from a viable corn stover market. This study uses data from the United States Department of Agriculture and other reliable sources to depict recent changes in corn, soybean, and energy markets. Price correlations confirmed that the prices of corn and soybeans are tightly linked. To determine how a corn stover market would impact corn and soybeans, a deterministic partial equilibrium model was used to analyze interactions between corn, soybeans, corn stover, and energy markets. The PE model also determined market-clearing prices for these commodities at different crude oil prices ranged from $60 to $160 per barrel under alternative biofuel policies. The simulated equilibrium prices were $4.70/bushel for corn, $12.20/bushel for soybeans, and $111.80/ton for corn stover in the presence of $1.01 subsidy per gallon of biofuel produced at $100 crude oil price. These projections are abstract from uncertainties in agricultural and energy markets. The estimated cost for harvest and storage of corn stover for a corn-soybean harvest was about $47.63, and for a case of corn-corn was $34.35 a ton at 15% moisture. The prices were used in a linear programming model to determine how farmers would allocate their land. Results showed that at high price incentives, Indiana farmers would partially switch to continuous corn rotations causing reduced soybean acreage. Current data from the USDA confirms that there has been a decline in soybean production, but not as drastic of a decline as the increase in corn acreage, implying other crops are being displaced. Geographically, there are many shifts in the mix of crop production. Our conclusion from the analysis of recent crop production data and the representative farm analysis is that if there were a viable market for biofuels and hence for corn stover, other things being equal, the central Corn Belt would see more continuous corn, but both corn and soybeans would increase in other areas as well.
Degree
M.S.
Advisors
Tyner, Purdue University.
Subject Area
Agricultural economics
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