Making bioenergy crops pay

Budgeting for bioenergy crop production and analyzing your cost of production will be critical to determining if bioenergy crops pay on your farm.

This article contains production budgets for corn, switchgrass, miscanthus, mixed grass, native prairie, energy beets and hybrid poplar trees. These budgets should be used as a place to start, not as the actual cost of production for any particular farm. The soil, climate and management differences will be different across the country. Make sure you plug in accurate numbers for your farm.

Annualized present value

Comparing annual with perennial crops can be tricky. Annual crops like corn are easy to figure out the cost of production each year. Perennial crops are more difficult to determine because you have to amortize the establishment costs over the life of the stand. Most of the costs are incurred up front and are not earned until later in the life of the stand. Additional consideration should be given to cash flow. Hybrid poplar trees are harvested every 5 to 7 years. That means you will not have any income from this crop in the first 5 years, yet you have paid the cost to establish them.

Land, labor and management

When making any decisions, you must consider all economic aspects. The budgets presented here only account for cash costs. These are typical expenses you would expect to pay each year for normal crop production. Before making any decisions about producing a new bioenergy crop you need to include the “overhead” expenses like depreciation, interest, real estate taxes and insurance. There must be enough income to cover these expenses as well. These expenses can be more difficult to calculate and vary widely from one farm to another.

Time value of money

If you have $100,000 you could choose to invest it in a bioenergy crop or some other investment to earn interest. Either way, at the end of the life of the crop, you want this number to be bigger. You should be able to earn at least the rate of inflation. Present value is a way to calculate the inflation value of money. This can be added for the life of the stand. For example, switchgrass is expected to last for 10 years. The present value of my initial investment can be calculated for that 10-year period. Then if you want to compare this to an annual crop like corn, just divide it by the 10-year period. This is called the annualized present value. You will find this number in the last column of the Excel spreadsheet (or pdfs) linked below. This is the number you would use to compare various bioenergy crops.

Bioenergy crop budgets (link to files)

Corn + stover Excel PDF
Switchgrass Excel PDF
Miscanthus Excel PDF
Miscanthus (cheap rhizomes) Excel PDF
Native Prairie Excel PDF
Grass Mix + Clover Excel PDF
Hybrid Poplar Trees Excel PDF

Additional resources

Producer Model for Biomass Comparison – North Dakota State University

Biomass inventory

Machine/custom work rates and other budgets

Nutrient removal values

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