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How Bad Will The Financial Pinch Be In 2014?
Stu Ellis, FarmGate blog | October 16, 2013 Corn Harvest Corn and soybean yields this fall are about as good as the 2012 yields were bad. Despite the challenging weather that delayed planting and then later put corn and soybeans in moisture stress, many fields are recording exceptional yields. Although two successive years should not be chosen to either determine a trend or calculate an average, the 2012 and 2013 crops are certainly representative of the long term averages. But what will happen when the other shoe drops? If 2014 returns to an average yield, farmers could be hurting financially, particularly if they agree to higher cash rents in the coming weeks. We are in the annual farm leasing season and many landowners are going to want to see more revenue to reflect the higher value of their farmland. Farm operators who agree to that may have difficulty making the necessary cash rent payments based on expected prices and trend yields for 2014. One only has to look at futures prices at the CME’s Board of Trade to pencil out revenue. With the 2013 production of 14 billion bushels of corn, it is easy to see that the spring guarantee for crop insurance on the 2014 crop will be about $4.50 per bushel. And although we are 6 months away from planting the 2014 crop, the market is only willing to pay about $4.80 per bushel for the crop produced next year. That will go up or down, depending on the level of production, but that has to be considered a median price given the expected 2 billion bushel surplus left from the 2013 crop. It is easy to see the $7 and $8 corn prices from the 2012 drought are history. But even if a drought crop occurred in 2014, the 2013 surplus will not allow prices to climb very high. In fact, University of Illinois agricultural economist Gary Schnitkey says a 125 bushel yield next year will not even generate a $400 per acre return to the operator and land, even with a $6 harvest price and a $200 crop insurance payment. According to his calculations, even a high yield crop of 220 bushels per acre will still not return more than $300 per acre to the operator and land. His numbers are based on a $537 per acre cost for inputs, such as seed, fertilizer, chemicals, and fuel; everything but cash rent. And his concerns for the profitability of farmers for the 2013 and 2014 crops are focused on the rate of cash rent that farmers accept. With a return to land and operator, ranging from $275 to $391 depending on yield, there is not much left for the operator’s family living cost after cash rent is paid. And in many cases, there will be insufficient crop revenue in 2014 to cover cash rents in the $350 to $450 range. As farmers begin to pencil out budgets for 2014, one of the priorities will be what they can afford to pay for cash rent. While the Schnitkey numbers suggest that cash rents should decline if farmers want to remain in the black that may not be what the majority plans to do. Doane Agricultural Services of St. Louis recently surveyed farm operators and found 48 percent have agreed to 2014 cash rents higher than what they paid in 2013. Only 14 percent reported that rents declined. The balance of 38 percent saw rent stability, despite owner desires to raise the rent in the coming year. When competition for farmland fuels the fire in one’s belly, the result could be a serious case of financial indigestion. Summary: Farm profitability in the coming year could be challenged with low returns to operator and land, in the wake of low commodity prices, regardless of yield. Whether yields are exceptional or drought reduced farm revenue may not be able to meet current cash rent obligations, and much less any increased rent for the 2014 crop year. Source: FarmGate blog Continue reading
World’s First Refinery Turning Farm Waste to Bioethanol Opens
CRESCENTINO, Italy, October 14, 2013 (ENS) – The world’s first commercial-scale refinery to produce bioethanol from agricultural residues and energy crops has opened in northern Italy. When fully implemented, the system will provide 75 million liters of bioethanol annually for the European market. Present at the opening Wednesday were Italy’s Economic Development Minister Flavio Zanonato, local and regional officials and representatives from the European Commission, as well as more than 500 stakeholders from around the world. Beta Renewables new cullulosic ethanol plant in northern Italy (Photo courtesy Novozymes) Situated in fields outside the city of Crescentino, the plant uses wheat straw, rice straw and arundo donax, a high-yielding energy crop grown on marginal land to produce cellulosic ethanol, using enzymes to convert the plant material into fuel. The facility is the result of a collaboration between Beta Renewables, a cellulosic biofuels company based in Tortona, Italy, and Novozymes, the world’s largest producer of industrial enzymes, headquartered in Denmark. The two companies formed a strategic partnership in October 2012, making Novozymes the preferred enzyme supplier for Beta Renewables’ current and future cellulosic biofuel projects. “The advanced biofuels market presents transformational economic, environmental and social opportunities, and with the opening, we pave the way for a green revolution in the chemical sector,” said Beta Renewables Chairman and CEO Guido Ghisolfi. “We will continue to commercially expand Beta Renewables’ core technology throughout the world, and we are very confident at this stage given the demand we see around the globe.” “The opening today presents a leap forward and is truly the beginning of a new era for advanced biofuels,” said Novozymes CEO Peder Holk Nielsen. “Here, at this plant, enabled by Novozymes’ enzymatic technology, we will turn agricultural waste into millions of liters of low-emission green fuel, proving that cellulosic ethanol is no longer a distant dream. It is here, it is happening, and it is ready for large-scale commercialization.” Lignin, a polymer extracted from biomass during the ethanol production process, fuels an attached power plant, which generates enough power to meet the facility’s energy needs. Any excess green electricity will be sold to the local grid. Since 2011, more than US$200 million has been invested in research and development of the technology used to produce cellulosic ethanol at the Crescentino facility with financing from the Texas Pacific Group. Beta Rewables new biorefinery uses waste straw to make bioethanol. (Photo courtesy Novozymes) Beta Renewables says its Proesa™ engineering and production technology used with Novozymes’ Cellic® enzymes represent “the most cost-competitive advanced biofuels platform in existence today.” Proesa belongs to the so-called “second-generation” technologies which allow the use of the sugars present in lignocellulosic biomass to obtain fuel and other chemicals with lower greenhouse gas emissions and at competitive costs compared to fossil fuels such as oil and natural gas. “Investors interested in cellulosic ethanol often ask when the technology will be ready at commercial scale,” said Ghisolfi. “PROESA enables customers to produce advanced biofuel at a cost-competitive price relative to conventional biofuels – at large-scale and today.” “Our complete offering makes cellulosic biofuel projects bankable and replicable,” Ghisolfi said. “With the world’s first commercial plant up and running here in northern Italy, I very much look forward to an exciting journey of establishing an entirely new, and very promising, industry.” A recent study by Bloomberg New Energy Finance concludes that transforming agricultural residues into advanced biofuels could create millions of jobs worldwide, economic growth, reduction of greenhouse gas emissions, and energy security by 2030. But before this can occur, Ghisolfi and Nielsen say government support is necessary to accelerate the deployment of next-generation biorefineries. “Policy makers now need to send clear signals to encourage the necessary investments in advanced biofuels,” said Nielsen. “Stable and predictable blending mandates, incentives for the collection of agricultural residues, and investment support for the first large-scale plants will help move the world substantially in terms of reducing greenhouse gases, stimulating economies, and providing energy security. Continued reliance on fossil fuels is not viable.” Italy’s government is hearing this message. Zanonato and Environment Minister Andrea Orlando responded on the facility’s opening day with a decree that promotes the creation of new biorefineries. The decree simplifies the procedures for authorizing biorefineries, with the dual purpose of promoting them in Italy and facilitating investments in the industry. “The use of this type of biofuel,” said Orlando, “is the solution to get to reach the target of 10 percent to 2020 European directive. The government is working to implement the plan, approved in recent months by the CIPE [the Interministerial Committee for Economic Planning], the decarbonization of the economy and the reduction of CO2 emissions, encouraging measures to promote renewable energy and energy efficiency, low-emission mobility, green chemistry and 2nd generation biofuels.” Continue reading
Invasion of the Giant Grass!
Sarah Laskow October 15, 2013 Fueling the needs of biofuel factories could mean growing fields of 30-foot-tall grass, but no one’s positive it will stay where it’s told. AP Photo/Allen Breed A rundo donax towers over the tallest man’s head. It’s thick, bamboo-like, and three-stories tall. It can withstand cold, and it can withstand drought. Give it water, and a little nitrogen, and it grows. Fast. Killing it can be difficult. In California, where it was introduced in the 1800s, Arundo has gotten so out of control that in some places it seems to be the only plant growing on the riverbanks. It doesn’t have seeds, but it doesn’t need them: it has other methods of multiplying. A fierce rainstorm can tear up its shallow roots and spread them far downstream. There, they start growing all over again. Mow it down, spray it with pesticides—it’s all futile. If any of the monstrous reeds are left upstream, they’ll grow back. Arundo doesn’t need to be near water to thrive, though. It grows pretty much anywhere. It grows in Oregon, Arizona, Texas, Missouri, Georgia, Florida, Maryland, Virginia—down the West Coast and across the broad swath of the southwest and southeast, up into the mid-Atlantic. Often it remains in small stands, growing tall, but staying in one place. But sometimes, it takes over and becomes an invasive species—an expensive problem for humans and a mortal threat for plants and animals. Energy companies, however, are set to make Arundo one of the stars of the biofuels industry. They think they can control it. They’re willing to take the risk. But not everyone is so sure it’s worth it. If the companies fail—if Arundo does get out—it could have irreparable consequences. I n Mills River, North Carolina, up in the mountains and not far from Asheville, a small plot of Arundo has been growing since 2008, alongside switchgrass and another unusually tall plant called giant miscanthus. This patchwork of grasses was planted as part of a study on crops that could feed a next-generation biofuel plant. The qualities that make Arundo frightening to people who’ve dealt with it as an invasive—its size, sturdiness, and quick growth—make it attractive to the biofuel industry. Although it’s not the only biofuel crop North Carolina is looking to grow (or the only one that’s considered invasive elsewhere in the country), it does have the potential to yield the most biomass per acre—a key metric to making next-generation biofuels financially feasible. “It’s the difference between having this industry work or not work,” says Matt Harrod, a director at Chemtex International. An Italian-owned polyester fiber, plastics, and design technology company, Chemtex has dipped into the biofuels market, and worked with liquefied natural gas, as well. Last year, in Crescentino, Italy, the company started up the world’s first commercial-scale plant to make ethanol from plants like Arundo instead of corn or sugar cane. The company’s also part of a joint venture that invested $200 million in developing a process to make this sort of cellulosic matter a cost-effective source for biofuel. Now, Chemtex wants to bring that same process to America, and has spent almost a million dollars lobbying the federal government over the past two years. Over the summer, the company announced it would receive federal-loan guarantees worth $99 million to build the United States’s first commercial-scale cellulosic biofuel plant in eastern North Carolina. Not long before, in spite of the objections of national and state environmental groups, the Environmental Protection Agency (EPA) added fuel made from Arundo to the Renewable Fuel Standard. (This is the policy that incentivizes the creation of biofuels and requires their use in the country’s cars and trucks.) Environmental advocates and scientists who have been dealing with Arundo as an invasive species think that the biofuels industry’s bet that this plant can be controlled is a bad one. More than 100 groups wrote to the EPA arguing against approving Arundo as a biofuel crop. “The last thing we need are government-sanctioned economic protections for an industry reliant on pests as their raw product,” Mark Newhouser, of the Sonoma Ecology Center, wrote me. “This is just common sense.” For years, the biofuel industry has been chasing the advantages of developing plants like Arundo as biofuel crops. And while there’s reams of research on different sources and strategies for creating cellulosic biofuel, the industry has had little success scaling that research up into a commercial enterprise. If “energy grasses” are proven a financially viable feedstock, the crops that feed ethanol plants could be grown on marginal land, with less chemical fertilizer than corn. The amount of land needed to meet the government’s renewable-fuel goals could shrink, too. But growing a crop like Arundo on an agricultural scale is the botanical equivalent of adopting a wolf. Most agricultural crops are like dogs: we’ve spent thousands of years domesticating them; we know, more or less, how they behave; we can control them. Like a tame wolf, Arundo might seem like it’s behaving well now, but there’s an inherent danger in having it around. “We haven’t talked about doing something on this scale in this time period since the invention of agriculture,” says Jacob Barney, a professor of invasive-plant ecology at Virginia Tech University, who’s studied these grasses. Corn has been bred for 10,000 years to grow only where humans plant it. Arundo ‘s been bred for only a fraction of that time. “It’s a wild thing,” Barney says. To the industry, ultimately, planting Arundo is about saving money. Higher yields per acre mean they have to spend less on land. Chemtex plans to contract with farmers to grow 18-19,000 acres of biofuel crops, according to Harrod, the Chemtex director. So far, he has about half of that accounted for, with switchgrass and biomass sorghum. Adding Arundo to the mix could help keep Chemtex’s costs down. “Biomass sorghum is a quick growth annual. You can plant it in late March or early April and have it ready in July. Switchgrass can come online in September and works well through the fall,” says Harrod. It costs less for a company like Chemtex to run a biofuel plant if it can take crops directly from nearby fields, year-round, without having to bale and store them. “ Arundo— they store themselves well in the field. They stand very well. They don’t fall, and they maintain a lot of their leaves,” Harrod explains. “So it fills those winter months from December to February that other crops can’t do.” In southeastern North Carolina, the land that’s most likely to be converted to fields of energy grasses is currently growing bright green, knee-high Bermuda grass for cow forage. But one day soon, you could driving down the same country road by these same fields and all of a sudden start feeling a little like Rick Moranis in Honey I Shrunk the Kids , with fields of grass stretching far above your head. I t’s difficult to predict if a species will become invasive in any particular place. But once it does it’s almost impossible to stop its spread. California has spent tens of millions of dollars trying to get rid of Arundo , and across the country, invasive species cost the economy a total of $7.7 billion in eradication costs and lost agricultural productivity. Many of these plants were planted by well-intentioned people for good reasons. 1 1. Kudzu, the most commonly cited scare story, was originally intended to provide shade and prevent soil erosion; it has taken over millions of acres of land. (There’s been some interest in using kudzu as a biofuel stock, as well.). Arundo hasn’t been a problem in many of the states where it’s been planted as an ornamental, or as a building material. “We don’t really have good data on why Arundo is not invasive in areas like Florida and South Carolina,” says Adam Lambert, a research biologist at University of California-Santa Barbara. But that doesn’t mean it never will be. Many weeds have a “lag phase” where, for a long time, they’re not a problem, until they reach some unknown, critical. Then, says Lambert, “they just start taking off.” At that point, the plants become much, much more expensive to deal with. There is a federal state-by-state noxious-weed directory, which could, in theory, help prevent invasive species from being planted or from spreading: no one is allowed to grow or transport the plants on these lists. But they are created according to political, rather than scientific, logic. “Governments are not basing decisions about “noxious” weeds on what the science is—what weed ecologists think of as noxious or invasive,” says Bryan Enders, a law professor who’s studied the regulation of invasive species. He, along with Jacob Barney, the Virginia Tech scientist, worked on a study that showed that there was little correlation between plants that scientists would classify as “invasive” and plants that are regulated. “The question is why?” says Enders. “The power in the legislature traditionally is in the agricultural community. Plants that have been a problem for agriculture have been classified as noxious weeds. If it’s not a problem to agriculture, then the state doesn’t see any reason to regulate.” The little regulation that does exist is inconsistent. Maryland has six plants on its noxious-weed list. None of those plants are on Virginia’s list. California has listed Arundo as a noxious weed. So have Texas, Hawaii, and Tennessee. Fourteen states consider it invasive. Environmental groups pushed for North Carolina to add Arundo to the state’s noxious weed list, but earlier this year, the state’s Board of Agriculture denied their petition. The state government has long been promoting the biofuel industry; the board said that Arundo could be grown “responsibly,” as long as proper management practices were in place. Right now, the federal government is paying scientists to figure out how make Arundo grow even bigger and faster while simultaneously paying other scientists to figure out how to eliminate it. Lambert’s lab is collaborating with the USDA’s Agricultural Research Service to find a biocontrol agent for Arundo —a bug or a fungus that naturally keeps it in check. In the long run, using biocontrol is cheaper than continuing to plow money into chopping Arundo down and spraying it with pesticides. Like Arundo , though, these “agents” are wild things. “Once you release them, you can’t get them back,” says Lambert. If these scientists find the right insect and release it in California, there’s no guarantee it won’t make its way across the country, to fields where Arundo ’s being grown as a biofuel, and decimate those crops. Scientists who do this work worry that the biofuel industry’s interest in Arundo will create political heft that weighs against their own work. Given the money Chemtex has already spent on lobbyists, it’s not an unjustified fear. If farmers do plant Arundo in large quantities, they’ll need to follow a protocol that minimizes the risk of the plant spreading—plant only in certain places, leave a border around the field, cover trucks transporting plant material, destroy any plants left if the project fails. “There’s no such thing as a risk-free anything,” says Jacob Barney, who helped develop this regime. “It’s all about understanding what the risk is and mitigate that risk to the greatest degree possible.” This is the story of every form of energy—new or old—that the country is pursuing right now. Fracking horizontal wells is riskier than drilling vertical ones. Deepwater oil drilling has dangers that traditional techniques did not. But within these regimes, some energy sources are riskier than others: tall turbines might kill birds and bats, but they’re not going to spill wind all over the countryside. If the country is going to stop using cheap, polluting fuels like coal and oil, energy suppliers need to choose the least bad option; the alternative is relying on even riskier and more destructive strategies, like mining tar sands, to produce traditional fuels. Biofuels are clearly on the less-bad side, and there’s a need for them to fuel vehicles, like planes, that can’t easily run on electricity. And everyone agrees that it’s important for the industry to figure out how to use less-resource intensive cellulosic feedstocks instead of corn or sugar cane. Environmental groups that worry about invasives argue, simply, that there are plenty of energy grasses to choose from: biofuels companies should limit themselves to crops that don’t have a history as problem children. No matter what precautions the industry takes, it’s impossible, in the short term, to eliminate the risk of invasiveness for a crop like Arundo . Controlling wild things, even plants, is an unpredictable business. If this were a horror movie— Invasion of the 30-Foot-Tall Monster Grass!!— where Arundo moved in and took over, only to be killed off, cut to the ground, and sprayed with heavy-duty pesticides, it would end with a shot of a single sprout of the plant, making its way out of the soil. In the sequel, the plant will have learned to grow seeds. Continue reading