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Costs of Producing Switchgrass for Biomass in Southern Iowa*

Michael D. Duffy and Virginie Y. Nanhou

Switchgrass (Panicum virgatum L., Poaceae) is a perennial warm-season grass native to Iowa, grown for decades on marginal lands not well suited for conventional row crops. It is now being recognized as a potential energy source and alternative cash crop for Iowans. The Chariton Valley Biomass Project is Iowa’s first major switchgrass demonstration project, promoting switchgrass’ potential for large-scale production. Iowa imports 98% of the fuels needed to generate energy in the state. Future success of a domestic energy industry in Iowa is dependent on the development of alternative energy sources, including biomass. The support and participation of biomass producers will be critical to this future.

Farmers’ acceptance of switchgrass will be determined by its profitability relative to existing alternative land uses. Therefore costs of production are a major factor determining whether or not producers will grow switchgrass. Switchgrass has been planted by some farmers under the Conservation Reserve Program (CRP) but the management techniques were essentially minimal and thus different from the ones required to make it a viable activity for producers. Since switchgrass is a relatively new commercial crop little is known about the costs to produce the crop at a commercial level. Some researchers have estimated the costs of production using data from experimental plots. The problem with using experimental data is that they may be different from the situation on farmers’ fields. This work estimates switchgrass production costs using producers’ data as much as possible and incorporating their actual management techniques.

This paper provides information on the costs of producing switchgrass primarily for biomass in Southern Iowa. The details about switchgrass’ production and cultural practices are not discussed here but can be found in other Iowa State University (ISU) extension publications (Teel et al. 1997; ISU 1998).

WHAT IS SWITCHGRASS?

Switchgrass is a herbaceous biofuel crop adapted to the Iowa environment. Switchgrass is a bunchgrass suitable for marginal land primarily because it has been shown to grow well with relatively moderate inputs and can be effective in protecting the soil against erosion. Switchgrass offers additional environmental benefits such as helping to improve water quality and wildlife habitat, helping to reduce carbon emissions through carbon sequestration in the soil, and serving as a replacement for fossil fuels in electricity generation. Switchgrass may be used as a pasture or hay crop. More recently it has been examined as a biomass crop to produce energy.

DESCRIPTION OF SCENARIOS

Switchgrass cultural practices vary considerably among farmers in southern Iowa. This is due partially to farmer experimentation with alternative techniques and to the different soil types and existing practices. This variation results in a wide range of production costs. Overall the cultural practices in southern Iowa can be grouped into different scenarios based on the time of year for seeding, the type of seeding method and the land use. The time of year when switchgrass is planted affects the production costs through the amount of seed used, the success rate of the seeding, and the need to reseed. The existing land use before switchgrass is planted is crucial because it affects the land charge and thus the overall cost of producing switchgrass. Similarly, the type of machinery used for the seeding (airflow planter, drill, and no-till drill) influences the costs.

The costs of production were estimated for seven different scenarios and over four different yield levels; 3.36, 6.72, 8.96 and 13.44 t/ha (1.5, 3, 4 and 6 tons/acre). There are two different frost seeding scenarios and five spring seeding scenarios, all presented in Table 1. Cropland refers to land that was previously allocated to crop production while grassland indicates a pasture or land used for grass production before being used for switchgrass. This designation determines the land charge attributed to the scenario.

Table 1. Description of different scenarios.

METHODS USED FOR COST ESTIMATIONS

Assumptions

In the literature, there is a wide range of switchgrass production costs estimates due to the variety of assumptions used. As much as possible, producers’ data were used in the estimations presented in this paper, meaning that actual cultural and management practices were taken into consideration. However, some assumptions were also made. They are the following:

A normal switchgrass stand has a life span of ten years.

Harvest is done in large square bales with an average weight of 397 kg (875 lb.)/bale

No harvest in the seeding (establishment) year. The harvest activities start in the second year of the stand life if there has not been any reseeding.

Switchgrass is harvested during the fall period. This assumption has implications on the P and K removal rates; higher P and K removal rates are observed when harvest takes place in fall than spring.

Probability of 25% reseeding for frost seeding and 50% for spring seeding.

Machinery operations are done through custom hire. Machinery operations are charged at the prevailing custom rates for the area.

Land charges: $185/ha ($75/acre) for cropland and $123/ha ($50/acre) for grassland

Amortization of establishment costs and reseeding costs is at 8% on the ten years of the stand’s life span.

A 9% interest rate applied on operating expenses during each production year.

Each scenario followed an appropriate weed management program. Herbicides were charged at average price per unit in the area.

Estimated costs are farm gate costs; they do not include transportation costs to the power plant nor storage costs.

Switchgrass is a 10-year crop, therefore it is necessary to account for the lime needs. A lime charge is assessed during the establishment year and prorated over the life of the stand.

A linear relationship between the rates of P and K removal rates and switchgrass yields during the production years is assumed.

Input Costs Data

Machinery. Pre-harvest machinery operations vary by scenario. Some scenarios require more seed bed preparation while others rely more on chemicals. The cost for each machinery operation comes from Iowa State custom rate survey (Edwards et al. 2000). Staging and loading costs come from real harvest data collected by the Chariton Valley Biomass project.

Seed. Seed is assumed to cost $8.81/kg ($4/lb.) of pure live seed (PLS). A cultivar commonly used in Southern Iowa is ‘Cave-in-Rock’. The seeding rate for frost seeding is a minimum of 6.72 kg/ha (6 lb./acre) of PLS whereas the spring-seeded scenarios use a minimum of 5.6 kg/ha (5 lb./acre) of PLS.

Herbicides. Each scenario is assumed to follow a standard herbicide treatment. Scenarios 1, 3, 4 and 5 use a combination of atrazine and 2,4 D for weed control, while scenarios 2, 6, and 7 use Roundup® in addition to atrazine and 2,4 D. Roundup® is used for land preparation in association with the mowing. The price per unit for herbicides reflects 2000 prices.

Fertilizers and Lime. During the establishment year, it is assumed that phosphorus and potassium are applied at the rate of 33.6 kg/ha (30 lb./acre) and 44.8 kg/ha (40 lb./acre), respectively. To avoid competition between the new switchgrass stand and weeds, no nitrogen is applied in the establishment year.

During production years, the phosphorus and potassium fertilization program varies by yield to compensate for the removal rate in potassium (K) and phosphorus (P). With each tonne of switchgrass harvested, there are 0.42 kg of P and 9.47 kg of K removed (0.83 lb. of P and 18.92 lb. of K/ton of switchgrass) (Radiotis et al. 1999; Lemus 2000). It is further assumed that the relationship between the rates of P and K removal and switchgrass yields is linear. Nitrogen fertilizer is applied at 112 kg/ha (100 lb./acre). Prices for fertilizers used are reported in an Iowa State University extension publication (Duffy and Smith 2000).

Lime needs will vary by field. It was assumed, however, that at some time over the life of the switchgrass stand, lime would have to be applied. Therefore, a fixed charge per hectare is assessed for the establishment year that will be prorated over the stand life and included in the annual production costs.

Harvesting Operations. Harvesting activities involve mowing, raking, baling, staging, and loading. Depending on the equipment used, the estimates of time and cost of harvesting can vary considerably. Switchgrass harvesting differs from that of hay or alfalfa because of the difference in plant density (switchgrass is less dense than hay) and height (switchgrass is taller than hay). Some variations in the estimations can also occur due to the type of bale (large round bale or large square bale). These differences influence the harvesting time and thus the cost. It is assumed that harvesting costs are not linear; that is, as the yield increases the harvesting costs per hectare increase but the costs per tonne decrease. For the budget estimations in this paper, it is assumed that harvest is done in large square bales weighing 397 kg (875 lb.) each, which is the average weight observed for bales harvested in Southern Iowa. Even though the bales are rectangular in shape (3 feet high × 4 feet wide × 8 feet long), the terminology “square bales” is common. In addition, since the production costs are farm gate costs, this means that they don’t include any costs associated with lengthy on-farm storage or transportation to final biomass facility. Estimates for transportation costs can be found in other studies (Walsh 1994; Park 1996; Walsh and Becker 1996).

The cost estimate for mowing and raking is on a per hectare basis, while cost estimates for baling and staging are on a per tonne basis. Some of the harvest costs (mowing, raking, and baling) come from Iowa State custom rate survey (Edwards et al. 2000). Staging and loading costs come from real harvest data collected by the Chariton Valley Biomass project.

COST ESTIMATION PROCEDURES AND OUTCOMES

There are three main cost components to switchgrass production costs. There are the establishment costs, costs for reseeding and the production costs. Scenario 2, frost seeding with an airflow planter on grassland, is used for illustration.

Establishment Costs. The creation of the budget starts with estimating the establishment costs. The establishment costs were prorated over an 11-year period to obtain a yearly establishment cost. These costs consist of the standard components of seed, fertilizer, pesticides, and land preparation. Table 2 presents an estimated establishment budget for switchgrass using scenario 2, frost seeding with an airflow planter on grassland. Note the prorated establishment cost presented on the last line of Table 2. This represents the yearly establishment cost that will be added to the annual production costs estimate. It assumed that there is no harvesting during the establishment year because the stand is not strong enough to justify harvesting.

Table 2. Estimated establishment budget using frost seeding on grassland with airflow planter (scenario 2). Source: Duffy and Nanhou (2001).

^zThe costs of pre-harvest machinery operations come from Edwards et al. (2000).
^yPhosphorus price = $0.59/kg; potassium price = $0.36/kg

Reseeding Costs. Switchgrass will not always establish in the first year. To account for the failure of seeding the first year, expected costs of reseeding were estimated and this constitutes the second step in the estimations. The reseeding costs contain seed, fertilizers, and pesticides related costs, and a land charge (there is no land preparation cost included). Based on switchgrass producers’ experience in southern Iowa, the expected probability of reseeding is set at 25% and 50% for frost seeding and spring seeding, respectively. The reseeding costs are multiplied by the expected probability of reseeding to produce the expected reseeding cost. This expected reseeding cost is prorated over 10 years to generate a yearly reseeding cost that is added to the annual production cost estimates. Table 3 shows an estimated reseeding budget for scenario 2, frost seeding with an airflow planter on grassland. Unlike the establishment budget, they do not include any land preparation costs (no disking and harrowing, no mowing and Roundup® application). In addition, a reseeding rate of 4.48 kg/ha (4 lb./acre) of PLS is recommended. The fertilization program applied during the establishment is followed here except there is no lime application. The herbicide program is similar to the one applied during the production year. A land charge is included in the cost. Note that the expected reseeding cost is equal to the total reseeding cost multiplied by the 25% probability of reseeding. Note also that the last line gives the prorated reseeding cost (over the 10 years of a stand’s life) that will be added as a yearly reseeding cost to the prorated establishment cost and to the annual production cost. It is assumed that there is no harvest in the reseeding year.

Table 3. Reseeding estimated costs using frost seeding, switchgrass conversion from grassland (probability of reseeding, 25%). Source: Duffy and Nanhou (2001).

^zThe costs of pre-harvest machinery operations come from Edwards et al. (2000).
^yPhosphorus price = $0.59/kg; potassium price = $0.36/kg

Annual Production Costs. The last step consist of estimating the annual production costs. These costs include the standard components for pesticides and fertilizers plus a yearly land charge. They also contain harvest costs, which will vary depending on the switchgrass yield. Table 4 presents an estimated production year budget for switchgrass under scenario 2, frost seeding with an airflow planter on grassland, assuming a 8.96 t/ha yield level (4 tons/acre). A variation in the yield level considered will result in a variation in costs. The fertilizer application rate varies by the yield to compensate for the removal rate of potassium (K) and phosphorus (P). The herbicide program is representative of practices followed by biomass producers in Southern Iowa. From harvest data gathered from the field, it appears that harvesting costs are not linear; that is as the yield increases, the harvesting costs per hectare increase but the costs per tonne decrease. This observation is taken into consideration in harvest costs estimations. The cost estimate for mowing and raking is on a per hectare basis, while cost estimates for baling and staging are on a per tonne basis. The transportation cost to a biomass facility or the costs associated to lengthy on-farm storage are not included.

Table 4. Estimated annual production costs using frost seeding, switchgrass conversion from grasslands [expected yield: 8.96 t/ha (4 tons/acre), approximately 23 large square bales: 397 kg (875 lb.)/bale]. Source: Duffy and Nanhou (2001).

^zThe costs of pre-harvest machinery operations come from Edwards et al. (2000).

Total Yearly Production Costs. The overall estimated yearly costs of producing switchgrass are therefore equal to the prorated establishment costs plus the prorated expected reseeding costs plus the annual production costs. Note at the bottom of Table 5, the prorated establishment and reseeding costs are added to the annual production cost to produce the total estimated yearly production costs.

Table 5. Estimated total yearly production costs for frost seeding, switchgrass on grassland (scenario 2). Expected yield = 8.96 t/ha (4 tons/acre), approximately 23 large square bales: 397 kg (875 lb.)/bale.

MAIN FINDINGS

Frost seeding scenarios produced the lowest costs as shown in Fig. 1. Table 6 summarizes the costs of producing switchgrass under each of the seven scenarios and for four different yield levels; 3.36, 6.72, 8.96, and 13.44 t/ha (1.5, 3, 4, and 6 tons/acre). Scenario 1, frost seeding on cropland with airflow planter, has the lowest cost of production among all the scenarios on cropland for either frost seeding or spring seeding. While scenario 2, frost seeding on grassland with airflow planter, has the lowest production cost among all the scenarios (Fig. 1). As the yield increased from 3.36 to 13.44 t/ha (1.5 to 6 tons/acre), the costs under scenario 2 decrease by 57%, from $125.58 to $53.51/t ($114 to $49/ton) (Table 6).

Fig. 1. Costs comparison for seven scenarios at 8.96 t/ha (4 tons/acre).

Table 6. Cost summaries for the seven scenarios.

Overall, the cost of producing switchgrass is reduced by more than 50% when the yields go from 3.36 to 13.44 t/ha (1.5 to 6 tons/acre). The costs of production per tonne decrease at a decreasing rate as yields increase. For example, with frost seeding on cropland costs decreased 40% when increasing yield from 3.36 to 6.72 t/ha (1.5 to 3 tons/acre). However, costs only decreased by 33% when going from 6.72 to 13.44 t/ha (3 to 6 tons/acre). This is similar to the frost seeding on grassland where the costs decreased by 38% going from 3.36 to 6.72 t/ha (1.5 to 3 tons/acre) and by 31% going from 6.72 to 13.44 t/ha (3 to 6 tons/acre).

These results demonstrate that yield is an important determinant of the level of costs. Switchgrass yields observed in the field range from slightly less than one to over 9 t/ha (1 to over 4 tons/acre) per year of biomass. It should be noted that, in most cases, biomass producers have not yet implemented all of the best management techniques that will likely improve yields. Consequently, the successful production of switchgrass for biomass depends on the use of practices that increase yields such as planting higher yielding cultivars.

The costs were also estimated using different land charges (Table 7). A 33% increase in the land charge under scenario 1, from $185 to $247/ha ($75 to $100/acre), caused a 13%, 11%, and 8% increase in the cost per tonne for 3.36, 6.72, and 13.44 t/ha yields (1.5, 3, and 6 ton). Similarly, a 50% decrease in land charges under scenario 2, from $123 to $62/ha ($50 to $25/acre), decreased costs by 15%, 12%, and 9% for the 3.36, 6.72, and 13.44 t/ha yields (1.5, 3, and 6 ton yields). At $247/ha land charge, costs could be reduced by over 61% by quadrupling the yields from 3.36 to 13.44 t/ha while at lower land charges such as $123/ha, approximately 58% costs reduction was observed. Regardless of the scenario, as the yield increases the effect on the costs from an increase in land charge lessens. Therefore, the cost for land has the second most significant influence on cost differences after the yields. This result is illustrated by Fig. 2. The choice of the type of land for switchgrass production is important. Switchgrass production for biomass would be a viable activity primarily on marginal land using best management techniques.

Table 7. Summary of switchgrass production costs/t with varying land charges.

^zAmounts are out of range of possibilities.

Fig. 2. Cost/t with varying land charges and alternative yield levels, scenario 1.

SUMMARY AND CONCLUSION

The cost of producing switchgrass varies considerably. The biggest variation comes from alternative yield and land charge assumptions. The appropriate land charge depends on the alternative uses for the land, i.e. the quality of the land. If the land had been cropland then the opportunity costs will be higher, conversely if the land was grassland the costs will be lower. In the present study, converting land from pasture or hay ground produces the lowest costs of production. The scenario with the lowest cost is scenario 2; frost seeding on grassland with airflow planter.

The two major factors affecting switchgrass production cost are the expected yield and the land charge. Yields are the key factor in the cost of switchgrass production. Some producers using best management practices have reached yields of 8.96 t/ha (4 tons/acre). As improved management practices are applied and higher yielding cultivars become available the cost of production will decrease.

Switchgrass is a new commercial crop in Iowa. Only recently has work begun to improve switchgrass yields. Emphasis should be put on research to improve yields.

Switchgrass has to be profitable to be adopted. One of the key components in profitability is knowing costs of production. Farmers must consider the costs and possible returns from switchgrass before planting. They must also consider the costs and returns of the alternatives when making a decision.

At this time, the expected price for switchgrass grown for biomass is uncertain. However, given the versatility and environmental benefits of switchgrass, it is anticipated that public subsidies and markets may develop to encourage its production. Farmers must consider all financial and environmental aspects of land use decisions before selecting the crop to plant and the land on which to plant it.

REFERENCES

• Duffy, M.D. and D. Smith. 2000. Estimated costs of crop production in Iowa—2001. Iowa State University Extension, Fm-1712. Rev. Dec. 2000.
• Duffy, M.D. and V.Y. Nanhou. 2001. Costs of producing Switchgrass for Biomass in Southern Iowa. Iowa State University Extension, Pm 1866.
• Edwards, W., D. Smith, B. Mc Lees, and J. Baitinger. 2000. 2000 Iowa farm custom rate survey. Iowa State Univ. Ext., FM 1698. Rev. March 2000.
• Iowa State University (ISU) Extension. 1998. Switchgrass seeding recommendations for the production of biomass fuel in southern Iowa. Pm 1773.
• Lemus, B.R.W. 2000. Cultivar and fertility effects on switchgrass biofuel production in southern Iowa. MS thesis. Iowa State Univ., Ames.
• Park, Y.W. 1996. Economic feasibility of growing herbaceous biomass energy crops in Iowa. Ph.D. dissertation. Iowa State Univ., Ames.
• Radiotis, T., J. Li, K. Goel, and R. Eisner. 1999. Fiber characteristics, pulpability, and bleachability of switchgrass. Tappi J. 82:100–105.
• Teel, A., S. Barnhart, and G. Miller. 1997. Management guide for the production of switchgrass for biomass fuel in southern Iowa. Iowa State Univ. Ext., Pm 1710.
• Walsh, M.E. 1994. The cost of producing switchgrass as dedicated energy crop. Biologue, 4th Qtr:35–36.
• Walsh, M.E. and D. Becker. 1996. Biocost: A software program to estimate the cost of producing bioenergy crops. Proc. Bioenergy 96. Sept. 15–20, 1996, Nashville, TN.