EnergyCalculating the benefits of switching from food to energy crops

Along with the growing interest in biomass energy crops as renewable alternatives to fossil fuels comes a growing list of questions from corn and soybean farmers about what it will cost them to switch. A University of Illinois, Urbana-Champaign release reports that University of Illinois agricultural economist Madhu Khanna developed a customizable online calculator to eliminate some of the guesswork and help farmers make the decision.

“We’ve been doing calculations on what it would cost to produce energy crops in Illinois and other states for quite some time, and we realized that it could be useful to people who want to be able to calculate what these costs would be on their own farm,” Khanna said. “We wanted to create a calculator so farmers would be able to make their own assessment.”

The feedstock cost and profitability calculator can be found here.

“It’s an information dissemination tool,” Khanna said. “The calculator allows farmers to put in their own parameters. They can customize the costs based on what their current farming operation looks like, what their current returns are on the land that they are thinking about converting, and learn what it would cost to grow an energy crop on it instead. They can decide at what price it might be feasible for them to produce an energy crop. What is the minimum price they would need in order to make it worthwhile?”

After selecting a baseline crop that they are currently farming, users provide specific information about their expenses, yields, and inputs.

“Unlike corn and soybeans where we’ve had years of experience and people have developed recommended, standardized application rates and planting techniques, these bioenergy crops are still very experimental,” Khanna said. “We’re still figuring out what the optimum rate of nitrogen application should be, the timing for harvest, and so on. This is based on a representative set of assumptions using our best knowledge to date.”

Before using the calculator, Khanna recommends that farmers gather some key information about their current operating expenditures. For example, one line item on the calculator requires the discount rate.

“If farmers are thinking of growing energy crops purely as an investment decision, then they would be interested in getting the same return from their investment in an energy crop over time as they would get if they were to put this money in the bank. That’s the discount rate they should use when discounting future returns to compare them