With the improvement in technologies, many agricultural products are now used for producing electricity and liquid fuel for transportation. In 1993, over three quadrillion Btu of biomass energy were consumed in the United States, representing about 3.7 percent of total U.S. energy consumption. Energy from wood accounted for 87 percent of total biomass energy consumption, while energy from solid waste and corn-ethanol made up 10 and 3 percent. Wood was consumed in the United States for industrial and utility (two-thirds) as well as residential use (one-third). Wood energy use in the commercial sector was estimated to be over 20 billion Btu in 1986, the last year of available data. Consumption of wood in the residential sector has been declining, due to people moving from rural to urban areas; the scarcity of inexpensive fuel wood; environmental restrictions on the burning of wood, especially in populated areas; and the emergence of clean-burning and more efficient gas fireplaces. Biomass Electricity During the 1980's national interest grew in wood-burning electric-generating plants as a result of the National Energy Policy Act and state utility regulatory actions. More than 5,800 megawatts of power from wood-fueled electricity were added to the 200 existing in 1979. Of nearly a thousand wood-fired plants ranging from 1 to over 100 megawatts, only a third offer electricity for sale. The rest are owned and operated by paper and wood production industries for their own use. Biomass-based electricity is most economical in those regions where electricity is relatively expensive and wood is cheap. Despite rapid growth in the 1980s, the biomass power industry is now in a low-growth phase because of low fossil fuel prices, excess capacity, competitive bidding for power sales, and costly permitting procedures. Competition from efficient natural gas-turbine generators has also dampened the market for biomass projects. Natural gas has benefited from its low investment cost per kilowatt hour (Kwh), affordability and abundance due to new drilling technology, and ability to burn cleaner than coal, wood, and oil. Energy crops (wood and grass) could become important feedstocks for the production of liquid fuels, electricity, chemicals, and other industrial products. With increases in yield and competitive conversion technologies, biomass crops such as herbaceous plants and wood might compete with fossil fuels for a broad range of uses. A biomass industry could also provide new income for farmers, jobs in rural areas, and markets for agricultural residues. Key to this scenario are increases in fossil fuel prices; more rapid advances in biomass gasification, gas clean-up, and gas-turbine power generation; and market development for biomass coproducts such as pulp wood chemicals. Policies that restrict greenhouse gas emissions or promote biomass production on idled land could also help. Fuel Ethanol Production Processes Ethanol is produced from corn by two standard production processes: wet- and dry-milling. With the exception of the initial separation process, the two processes are very similar. In dry-milling, the first step consists of grinding the corn, which is then slurried with water to form the mash and cooked. Enzymes convert the starch in the mash to sugar and, in the next stage, yeast ferment the sugars to produce beer. In the dry-mill process, the beer, containing alcohol, water, and dissolved solids, is separated from solids. It is then distilled and dehydrated to create anhydrous ethanol. The solids are dried and sold as distillers' dried grain with solubles (DDGS), commonly used as an animal protein feed. Using current technology, a bushel of corn when processed will yield 2.6 gallons of fuel-grade ethanol and 16.5-17.5 lbs. of DDGS. Carbon dioxide may also be collected from a fermentation tank. In wet-milling, the first step involves soaking the corn kernels in water and sulfur dioxide and separating the corn into its major components: the germ, fiber, gluten, and starch. All other components of the corn kernel are removed prior to fermentation of starch. These components are used to produce three coproducts: corn oil, corn gluten feed (CGF), and corn gluten meal (CGM). A bushel of corn, when processed by wet-milling, can produce 1.6 lbs. of corn oil, 12.5 lbs. of CGF, and 2.5 lbs. of CGM. The remaining starch is saccharified, fermented, and distilled as in the dry-milling production process. The Federal Government offers incentives for commercially competitive biomass energy, including unconventional fuel credits (99.3 cents per million Btu); power production tax credits (1.6 cents per kwh); alcohol fuel credits (60 cents per gallon of ethanol or methanol from biomass, in addition to 10 cents per gallon for "small" ethanol producers); accelerated depreciation (5 years versus 15-20 years) for certain biomass energy facilities; tax-exempt financing; cash subsidies (1.5 cents per kwh); and investment tax credits (6.5 percent) for growing energy crops exclusively for conversion of biomass to electricity (direct combustion and gasification) and liquid fuels. Given its uncertain competitiveness, biomass depends on projects that successfully demonstrate its utility for energy production in the United States. The U.S. Department of Energy (DOE) and the U.S. Department of Agriculture (USDA) are collaborating to develop technologies and to foster business arrangements that integrate electricity generation and rural development through biomass-based renewable energy (see chapter 5.1, Agricultural Technology Development). USDA will participate in these projects using existing authorities and programs, and DOE will share costs under authority of the Energy Policy Act of 1992 and the President's Climate Change Action Plan. Fuel Ethanol The oil embargoes of 1973 and 1979 renewed interest in alcohol fuels, primarily fuel ethanol from grain. Energy security, new Federal gasoline standards, and government incentives have driven the grain-based fuel ethanol industry. When the energy crisis first exposed U.S. vulnerability to energy supply interruptions, fuel ethanol from agricultural resources was viewed only as a potential gasoline extender. In 1990, ethanol emerged as an octane enhancer after the Environmental Protection Agency (EPA) began to phase out lead in gasoline. More recently, ethanol production received a major boost with the passage of EPA's Clean Air Act Amendments (CAA) of 1990 establishing the Oxygenated Fuels Program and Reformulated Gasoline (RFG) Program to control carbon monoxide (CO) and to mitigate ground-level ozone problems. Both programs require oxygen levels in gasoline of 2.7 percent (by weight) for oxygenated fuel and 2.0 percent for reformulated gasoline. The three leading oxygen additives are ethanol; ethyl tertiary butyl ether (ETBE), made from ethanol; and methyl tertiary butyl ether (MTBE) made from methanol, which is derived from natural gas. Adding ethanol, ETBE, or MTBE to gasoline to create "oxygenated" blends reduces the amount of CO released into the atmosphere. These three additives compete closely for markets. Methanol had been a cheaper oxygen additive than ethanol, but RFG programs and other chemical applications increased the demand for methanol, pushing methanol prices to $1.40 per gallon in 1994 from 35 cents in 1993. A temporary shutdown of a large methanol producing plant due to an explosion also caused methanol prices to rise. That gave ethanol, a substitute for methanol, a temporary boost. The methanol situation is expected to ease in 1997 as additional capacity comes on line. In addition, the Treasury Department announced in 1994 that the ethanol portion of ETBE was eligible for an exemption from the Federal excise tax of 18.4 cents per gallon, now available to ethanol. As gasoline blended with ETBE contains 5.6 percent ethanol, the tax break per gallon of ETBE amounts to 3 cents. For gasohol (gasoline containing 10 percent ethanol), the exemption is 4.5 cents. This ruling increased ETBE's competitiveness with other qualifying alcohols in the RFG market. Ethanol's competitiveness will also improve as producers adopt energy-efficient technologies and other cost-saving innovations. Fuel ethanol production in the United States has grown from just a few thousand gallons in the mid-1970's to 1.4 billion gallons in 1994 (fig. 3.3.3). As of July 1995, U.S. fuel ethanol industry was comprised of 41 operational facilities in 15 States. Several large producers dominate the industry. Archer Daniels Midland alone had 59 percent of U.S. annual operational production capacity (1.7 billion gallons) in 1995. About 71 percent of fuel ethanol's production capacity is in the Corn Belt region, followed by the Northern Plains with 14 percent. U.S. ethanol production capacity is nearly 2.2 billion gallons per year, including capacity under construction or in the engineering/financing stage and capacity which is shut down at present. The two main processes for producing ethanol from corn are wet-milling and dry-milling (see box, "Fuel Ethanol Production Processes," p. 139). Wet-milling accounts for about 60 percent of total ethanol production. Ethanol production costs vary greatly, depending largely on net feedstock cost (grain cost minus value of byproducts). For 1981-91, net feedstock cost ranged from 10 to 67 cents per gallon of ethanol, due mainly to large swings in the price of corn ($1.58 to $3.16 per bushel). Changes in coproduct prices also contributed to this variation. Together, capital and operating costs for wet milling ranged from 78 cents to $1.07 per gallon, bringing the cost of ethanol to $0.88-1.74 per gallon. With an expected price of corn of about $3 per bushel in the 1995/96 marketing year, total cost of producing ethanol could rise 20 to 23 cents per gallon due to higher net corn cost, lowering its competitiveness with other fuels. Higher corn prices have reduced profits for fuel ethanol producers and, consequently, production has been cut. In May 1996, the market price of corn reached a record $4.98 per bushel and some large ethanol producers further cut back production. Author: Mohinder Gill, (202) 219-0447 [mgill@econ.ag.gov]. Contributor: Hosein Shapouri. References Economic Report of the President (1995). Transmitted to the Congress, Feb. 1995. U.S. Government Printing Office, Washington, DC. Information Resources Inc. (1995). Personal Communication, Arlington, VA, July 5. Rendleman, C. Matthew, and Neil Hohmann (1993). "The Impact of Production Innovation in the Fuel Ethanol Industry". Agribusiness, Vol. 9, No. 3, pp. 217-231. Renewable Fuels Association (1995). Personal Communication, Washington, DC. Renewable Fuels Association (1994). Personal Communication, Washington, DC. Taylor, Harold (1994). Fertilizer Use and Price Statistics, 1960 - 1993. SB-893. U.S. Department of Agriculture, Economic Research Service. Sept. Recent ERS Reports on Energy Issues Farm Energy, AREI Update, 1995 No. 16 (Mohinder Gill). Farm fuel prices are influenced by crude oil prices especially imported crude oil. In 1994, compared with 1993, farm fuel prices fell by 5 - 8 percent as the imported crude oil price fell by 4 percent. Farm energy expenditures, at $5.56 billion in 1994, were 1 percent less, compared with 1993 an estimated 5.8 billion gallons of fuel was consumed in 1994, 7 percent higher than 1993, because of increased planted acreage. "The Agricultural Demand for Electricity in the United States," International Journal of Energy Research, 1995 Vol. 19 (Noel D. Uri and Mohinder Gill). The price of electricity is a factor impacting the quantity of electricity demanded by farmers for irrigation and nonirrigation uses, but there is no indication that other types of energy are substitutes for electricity. Number of acres irrigated and number of acres planted are important factors driving the demand for electricity for irrigation and nonirrigation uses. (Contact to obtain reports: Mohinder Gill, (202) 2190447 [mgill@econ.ag.gov]. U.S. Department of Agriculture, National Agricultural Statistics Service, Farm Production Expenditures, 1980-94 Summaries. .Agricultural Prices, 1981 1994 Summaries. (1995). Agricultural Prices, April. . (1995). Agricultural Prices, July. U.S. Department of Agriculture, Economic Research Service (1993). Emerging Technologies in Ethanol Production. AIB-663. (1989). Economics of Ethanol Production in the United States, AER-607. (1994). Industrial Uses of Agricultural Materials, Situation and Outlook Report, IUS-4, Dec. . (1996). Feed Outlook, FDS-0496, April. U.S. Department of Energy, Energy Information Administration (1994). Manufacturing Consumption of Energy 1991. DOE/EIA - 0512 (91), Dec. U.S. Environmental Protection Agency (1994). Pesticides Industry Sales and Usage, 1992 and 1993 Market Esti mates. PRODUCTION INPUTS 3.4 Farm Machinery Increasingly complex farm machinery is an essential F arm machinery and equipment are increasing in complexity, price, and, in many cases, size. Expenditures on farm machinery make up 13 percent of total production expenditures and farm machinery assets are 9 percent of total farm assets (USDA, ERS, 1996b; USDA, NASS, 1996b). Trends toward conservation tillage and no-till have prompted inventions such as the air drill and the coulter chisel plow. Precision farming is the impetus for new inventions, including continuous yield monitoring equipment and variable-input gaging devices, and will likely inspire more inventions in the near future. Operation of farm machinery can cause soil Farm Machinery Sales After showing a significant increase in 1994, Several demand factors were favorable for increased purchases of tractors and farm machinery in 1996, and purchases increased in most horsepower classes. Tractor sales in the 40-99 horsepower category increased 4 percent in 1996. Tractor sales in the 100-and-over horsepower category also increased 4 percent. Purchases of four-wheel-drive tractors stayed the same. Farm Machinery Safety Agriculture is one of the Nation's most hazardous occupations. Estimates of annual agricultural deaths vary between 26 and 50 workers per 100,000, compared with an annual rate of 11 for all industries combined (USDHHS, 1992; MMS, 1995). Little data are available on farm accidents, injuries, and illnesses. The census of agriculture included questions on the number of injuries and deaths on farms for the first time in 1992. Runyan, in 1993, published a review and synopsis of data sources on farm accidents. Nationally, some data are available from several sources: the Department of Labor, Department of Commerce, Product Safety Commission, Department of Health and Human Services, National Safety Council, Department of Agriculture, and the State Workers' Compensation Systems. Also, some data are available from State and local sources, including newspapers, coroners, hospitals, and medical personnel. Farm-related injuries totaled 64,813 in 1992 according to the census of agriculture (USDC, 1994a). There were 673 farm-related deaths. The census does not report the cause of injuries and deaths, but many were likely related to machinery use. A recent study of farm accidents in Kentucky found that 82 percent of tractor-related fatalities were due to rollovers. Most of these occurred while mowing (32 percent). All the victims were male. The median age of the tractors was 23 years, ranging from 2 to 41 years. Most of the fatalities could have been prevented had the tractor been equipped with rollover protection (ROPS) and seatbelts. ROPS and seatbelts were not required on new tractors until 1976 (MMS, 1995). The farm machinery industry has done much to improve farm safety. Rollover protection is provided on new tractors. Fully enclosed cabs offer protection on most larger tractors, combines, and other self-propelled equipment. Power takeoff shields have been standard equipment for many years. Warning decals are placed near hazardous locations. More effort to educate farmers, their families, and farmworkers about the dangers in operating farm machinery and equipment could help reduce injuries and fatalities. There are economic costs associated with deaths, injuries, and illnesses from farm-related causes. A New York study of people killed in farm accidents estimated that from $218,001 to $362,047 (adjusted to 1987 dollars) of lifetime expected income and opportunity costs (per person) were foregone due to farm accidents (Kelsey, 1991). Costs include health care, discounted future earnings, and special devices such as wheelchairs and lifts. In some cases, the farm has to be sold to help pay for medical expenses. Society also bears many of the costs of farm accidents when the family is unable to pay medical costs and expenses. 40-99 hp 100 hp and over Four-wheel-drive All farm wheel tractors Self-propelled combines 30,800 30,700 33,100 35,000 38,400 33,900 34,500 35,500 39,100 39,700 41,200 14,300 15,900 16,100 20,600 22,800 20,100 15,600 19,000 20,400 20,500 21,400 2,000 1,700 2,700 4,100 5,100 4,100 2,700 3,300 3,700 4,400 4,400 47,100 48,400 51,700 59,700 66,300 58,100 52,800 57,800 63,200 64,600 67,000 7,700 7,200 6,000 9,100 10,400 9,700 Source: USDA, ERS, based on Equipment Manufacturers Institute, various years. 7,700 7,850 8,500 9,200 9,000 |