Michigan State University Home Page

Assumptions

These budgets are based on a series of assumptions about production cost, yield and corn grain prices, and potential biomass prices.  Production cost includes the cost for planting material, pest control, fertilizer, and the necessary mechanical treatments for those applications as well as for harvest, including baling of biomass, corn dry-down to 15 percent moisture content and trucking.  Storage costs are not included.  Average prices for 2006-08 represent the Great Lakes region (sources include the USDA National Agricultural Statistical Service, Michigan Department of Agriculture data, and consultations with Extension agents and farmers).

Corn production costs and yields are taken from the most recent MSU Extension enterprise budgets.  Because of soil conditions, corn yields vary widely in Michigan.  We assume an average yield of 135 bushels per acre (bu/acre).  Corn prices have been volatile, especially over the past 3 years, so we use a range of corn prices from $2.50 to $4.50.  The midpoint of $3.50 per bushel is close to current outlook projections by the USDA Economic Research Service. 

Miscanthus Rhizomes: A Special Case
The cost of miscanthus rhizomes deserves special mention.  Miscanthus is propagated by rhizome and typically planted at a density of 4,050 rhizomes per acre.  Current Michigan prices are about $2 per rhizome, leading to a cost of $8,100 per acre for planting material alone.  Scientific literature in Europe shows the cost there to be near 5 cents per rhizome, and 2008 Michigan field research showed rapid rhizome proliferation.  If U.S. rhizome prices fall to European levels, the rhizome cost drops to $202.50 per acre.  Therefore, we evaluate miscanthus under two  scenarios – one with costly rhizomes and one with cheap rhizomes. 

There is little commercial production data available for switchgrass, miscanthus, poplar, mixed-grass or prairie systems in the Great Lakes region.  The production assumptions and yield data are informed estimates based on recent scientific literature.  Although recent scientific studies have not shown miscanthus yields to respond to nitrogen , we have included fertilizer applications to replace nutrients removed by harvested biomass.  There is no observable market price for biomass, so we use a range of prices here as well: $30, $60 and $90 per dry ton.  The low end of this range is an estimate of the price that refineries are likely able to afford; the high end reflects the 2006-08 average price for non-alfalfa hay, an alternative crop.  Typical mature biomass contains 20 percent moisture, but eventual contract prices will likely be based on energy content rather than raw tonnage.

Table 1. Summary of input and output assumptions.