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Five projects of varying size and complexity were pursued related to economic aspects of biodiesel and oilseed production in the Willamette Valley. Each area is summarized below.
Willamette Valley Agricultural Model
Model Overview: The purpose of the Willamette Valley Agricultural Model is to understand the possible effects of subsidies on the composition of the Willamette Valley’s agricultural system in the aggregate and by general land/soil categories. A nonlinear mathematical programming model of the Willamette Valley’s agricultural system is constructed to account for 17 major soil types, 19 major crops, irrigated/non-irrigated production options, 11 crop rotations, and 3 major regions. Oilseeds are assumed to serve as rotations for other crops. Estimates of yield differentials over soil types, transportation costs by region, costs by soil types, yield-based costs, and prices (endogenous & exogenous), are major determinants in the model. Programmatic constraints include contract limits for certain crops and feasible crop rotations. Land use constraints by region, soil type, and irrigation availability are derived using a Geographic Information System (GIS) developed by the author drawing upon multiple sources. The model is programmed to run using GAMS (General Algebraic Modeling System).
Thesis Findings: The study finds that 2008 oilseed subsidies (and 2005-2007 average commodity prices) are sufficient to induce oilseed production (approximately 240 million pounds total) on about 75 thousand acres, or about 7% of total the Willamette Valley’s land devoted to the production of its major and relatively easily interchangeable crops. Iterations of the model demonstrate that fallow and wheat acres are the first to decline due to increased oilseed production and that there is minimal change in terms of crops shifting from being grown on one general soil class to another. If flax and camelina can be grown for two years in a row before needing a year’s rotation, production levels would double given current subsidies and land use changes would be more dramatic. The model developed as a result of this research effort has the potential to be modified and used for future studies.
More information can be found at Modeling Oregon’s biodiesel subsidies and their potential effects on the Willamette Valley agricultural landscape.
Meal Market Size
A cursory analysis explored the size of the DDGS and Canola potential markets to begin to explore how large the oilseed to biodiesel market can become while still taking advantage of co-product credits. Dhuyvetter, et al.’s paper is recommended for this purpose since it is the most transparent about its assumptions and is the most straightforward in estimating the size of the potential DDGS for feed market in the United States. The same structure was then used, in concert with local poultry and dairy experts, to estimate the size of the Canola for feed meal market. Dhuyvetter et al finds that the size of the national market for DDGS for feed is approximately 56.1 million metric tons, which translates into approximately 19 billion gallons of ethanol (assuming 2.7 gallons of ethanol per bushel of corn and 17.4 pounds of DDGS per bushel of corn). Using the same structure as Dhuyvetter with daily intake values for Canola we find that the national potential market is maxed at approximately 38.7 million metric tons or 5.1 billion gallons of biodiesel (assuming 35% oil content and 90% extraction efficiency). Assuming higher oil yields and hexane-extraction levels of efficiency, 40% and 99% respectively, the 38.7 million metric tons translates into 7.3 billion gallons. For the area around Oregon (Oregon, Washington, Idaho, California) the market for DDGS and Canola meal for feed is estimated to be 4.10 and 4.13 million metric tons, or 1,700 and 550 million gallons of ethanol and biodiesel, respectively. (The previous numbers assume 35% oil content and 90% extraction efficiency.) It is important to note, however that no assessment of export markets has been conducted. Such markets could indeed have significant local impact. Cascade Grain in NW Oregon, for example, was structured with exports as a business component.
Biodiesel Private and Social Cost Estimates
This study assesses the economic potential of biodiesel production in the Willamette Valley for six oilseeds as potential feedstocks: canola, flax, camelina, yellow mustard, sunflower, and safflower. We evaluate costs and returns from feedstock production, oilseed crushing, and biodiesel processing. Our analysis is based on the best available information (available towards the end of 2008) on cost of production, yield, other technical parameters, market prices, and government subsidies and tax credits. The study evaluates the economic assessments in terms of current costs and returns excluding subsidies; costs and returns including subsidies; and, finally, in terms of the full “social cost” of production. Costs for the production of biodiesel at a small-scale (0.5 million gallons per year) are found to range between $5.82 to $12.94 per gallon depending on the feedstock.
Oilseed Crop and Biodiesel Production Cost Estimator Tools
The first decade of the 21st century has witnessed great variability in terms of agricultural commodity and input prices. Two tools were developed in order to be able to conduct an on-the-fly analysis of the feasibility of oilseed crop production as well as vegetable oil and biodiesel processing given various parameters (e.g. fertilizer prices, crop yields, electricity costs, etc.).
Oilseed Enterprise Budget Comparison Tool: The purpose of the oilseed enterprise budget comparison tool is to assist with the decision making process that a grower in Oregon might face when considering to grow his or her own oilseeds for biodiesel production.
Small-Scale Oilseed to Biodiesel Cost Estimator
The purpose of the biofuel cost estimator is to assist with the decision-making process that a grower in Oregon might face when considering to produce his or her own biofuel. The workbook has been designed to estimate the costs associated with extracting oil from oilseeds and subsequently processing the oil into biodiesel. The default values should not be regarded as authoritative in any way. Instead, they are estimates based on limited data available to the designer of this tool. The tool is split up into three distinct worksheets where the user can enter unique parameters to see how the final cost of biodiesel looks.
Specialty Seed Producers' Concerns Regarding Canola Production
As the world seeks out renewable sources of energy it has seen a major increase in the production of biodiesel and the raw materials it requires. Within that context, Oregon has turned its attention to Canola, the oil of which can be used as a basic raw material for the production of biodiesel. As soon as investigations commenced regarding the profitability and agronomic viability of Canola in Oregon reactions quickly came from the specialty seed industry. Since much of the specialty seed industry’s vegetables belong to the same genus as Canola (Brassica), if the crops are in close proximity, the genes of one may carry over into another. This investigation examines the concerns regarding the adverse effect that Canola production may have on the specialty seed industry in Oregon (potential mechanisms) and the argument that Canola has had a deleterious effect on specialty seed production elsewhere (historical cases). Findings include that it can be safely stated that there are historical, although very recent and limited, cases demonstrating the negative effect Canola may have on the specialty seed industry. Overall, interviews point to four areas as having had a decrease in specialty seed production due to Canola, all within the last fifteen years: Arizona (reason: lack of coordination), France (reason: pollen beetle), Italy, Denmark (reason: volunteer control). The investigation also finds, however, that there is a long list of concerns specialty seed producers have regarding how Canola may negatively impact specialty seed production. Five key highly interrelated aspects were mentioned: the need for a system and willingness to coordinate/collaborate in the face of differing crop approaches; volunteers, weeds, and oilseed persistence; monoculture & pest or disease effects; GMO out crossing. Of special significance is the sensitivity that Japanese and European purchasers have regarding GM traits in imports and the importance of coordination/cooperation between specialty seed growers and Canola growers to ensure safe distances between fields and appropriate field practices are conducted avoid volunteers, etc.