Vermont Biofuels Initiative: Supply Side

Feed and Fuel Project

Summary

The Vermont Sustainable Jobs Fund and Vermont Biofuels Association commissioned this oilseed crop market potential and economic feasibility study in order to explore whether Vermont farmers could sustainably, economically, and competitively produce some portion of Vermont’s liquid fuel and livestock feed demand. We were also interested in the requirements for and characteristics of small-scale, Vermont-made biofuels for local use, as an alternative to industrial-scale biofuel production.

Project partners hired Emily J. Stebbins, a graduate student, and Dr. Robert Parsons, an Agronomist and professor, from the University of Vermont’s Department of Community & Applied Economics, to analyze the market demand and co-production potential for livestock feed, food-grade oil, and biodiesel fuel derived from oilseed crops grown in Vermont. This report also borrows heavily from the data and analysis collected by Dr. Vern Grubinger and Dr. Heather Darby at UVM Extension over the past two growing seasons.

Although farmers and biodiesel enthusiasts have been excited about the potential for these products, the full extent of the equipment, capital, and acreage needed to successfully grow, harvest and process these crops has been unknown. Determining the economic feasibility for farmers of such activities is vitally important at this early stage. Discussions with over a dozen farmers who are at various stages of growing and processing oilseed crops have indicated that market and economic viability data and decision-making tools would be of great value.

Vermont meets most of its demand for oilseed co-products and substitutes through importation. In addition to food-grade vegetable oil, Vermont farms and businesses import over 100,000 tons of livestock meal, 78.6 million gallons of diesel fuel, and 147 million gallons of No. 2 heating oil per year. Demand for fuel is expected to remain strong, and to continue to increase in the short term. Furthermore, volatility and increases in the price of crude oil are expected to continue to raise the prices that farmers and consumers pay for liquid fuels, fertilizers, and livestock feed.

The 2002 USDA census indicates that only about 51,000 bushels of soybeans were harvested from 1,562 acres in Vermont, and most were roasted whole and fed to dairy cows. The production of oilseeds in Vermont for fuel or food-grade oil is now taking place at a small-scale and on an experimental basis on several farms.

Demand for oilseed meal in Vermont is driven by the dairy industry, with dairy cows estimated to account for approximately 97% of the market potential. Demand is particularly strong for organic livestock meals and vegetable oils, which are in short supply and command substantial price premiums. In general, the more “value added” to the end product, the higher the return per bushel or acre. The absence of genetically modified organisms (GMOs) is also an important criterion for organic feed mills and farmers, and could present additional opportunities for Vermont farmers interested in growing crops to meet this demand. Area purchasers of food and feed products expressed a willingness to buy and sometimes pay more for local co-products, provided they met quality and consistency standards and could be supplied reliably. For livestock meal, the key determinants of value are quality and consistency.

Production of oilseed crops and co-products is technically feasible in Vermont. Oilseed crops can grow well, and good yields are achievable given improved harvesting equipment and techniques. Crop trials from Vermont, Maine, and New Hampshire indicate that yields for oilseed crops at, or exceeding, the national average are achievable in Vermont’s climate and better agricultural soils. The primary factors necessary for consistent yields are appropriate harvesting equipment, additional experience to perfect oilseed harvesting techniques, and adequate drying and storage facilities. Custom combining could represent a new business opportunity if more farms add oilseeds to their crop rotations.

Farm-scale processing techniques can produce high-value, good-quality oilseed co-products, but further refinement and testing are needed. Thus far, the quality of the oil and oilseed meal produced at the farm scale appears promising. As much as 3 lbs per day of this meal, depending on the type of oilseed, could be included in a ration for a high-producing dairy cow. To be able to sell this meal to other farmers or a feed dealer at a competitive price however, the meal producer must be able to ensure that the meal is of a consistent quality. Further refinement and standardization of batch-processing techniques are needed, and additional, regular testing of the nutritional profile of farm-pressed meal is recommended.

In addition to proper harvesting equipment and technique, new infrastructure is needed to complete the value adding chain. Farm-scale pressing operations, including seed cleaner, storage bins, one or two expellers, and oil settling tanks, come in all sizes and price ranges. One Vermont farm spent an estimated $30,000 for this set up (using a single press) with an additional $35,000 to establish an on-farm biodiesel production facility with a 60,000 gallon annual capacity. From a technical perspective, these operations are relatively easy to establish, but do require careful space and site planning to ensure adequate safety measures and maximum efficiency.

Given Vermont’s current dairy-centered agricultural system, FFP researchers estimate that approximately 50,000 acres could be rotated to oilseed crops in any given year. However, consistent with trends over the past 40 years, Vermont’s dairy herd is anticipated to decline another 18% by 2017, and by that time an estimated 180,000 acres per year (90,000 on a rotational basis) could be shifted to oilseed crops. 90,000 acres is capable of producing enough oil for over 6 million gallons of biodiesel and 78,000 tons of oilseed meal, more than sufficient to meet the total on-farm demand for distillate fuels, and as much as 50 percent of the anticipated meal demand in 2017. Of course, much will depend on the future profitability of these operations and on the cost of imported feed and fuel at that time. These are some of the key factors that will likely determine just how much of Vermont’s cropland will be placed into oilseed production.

Recommendations

Further action and research related to the development and study of farm-scale oilseed crop and co-product production in Vermont is recommended.

1. Continue to build a network of farmers, processors, and other business owners involved in oilseed crop production, processing, distribution, and sales. Developing and sharing local experience and expertise in oilseed production, processing, and marketing will be key factors in the success of new growers and processors.

2. Establish systematic processes for testing, refining, and recording results of on-farm meal production to establish consistent quality standards. The key determinants of a livestock meal’s value to feed dealers and farmers are nutritional quality and consistency. Unless quality control can be established, the price of farm-processed meal will be discounted significantly. Farm-scale processors seeking to sell their meal must establish a standard process that consistently creates a product of a certain quality. Regular testing of meal batch samples is recommended until a process is established, as well as an in situ amino acid test to establish the protein characteristics of the meal.

3. Investigate small cooperative enterprise models for oilseed processing and biodiesel
production. Several farmers have expressed interest in sharing investment in larger-scale oilseed-processing or biodiesel-making facilities. Dividing capital and operating costs among five to ten neighboring farms could lower barriers to entry of these markets, but the economic feasibility of such a model has not been studied in-depth.

4. Investigate the economic feasibility of a mobile oilseed press and/or biodiesel production unit that could travel site to site.

5. Further investigate the range of equipment, capital and operating costs to set up and run an on-farm oilseed crop production facility. Because Vermont currently has one on-farm demonstration facility which is nearing completion and one other in the works, we cannot yet say with confidence how much equipment and capital are needed to run such
a facility – either for on-farm only use and/or for revenue generation through sales off the farm. Additional data will be available in 2008 and 2009 once these two facilities are fully operational.

6. Conduct further research on the net energy savings to farmers from biodiesel production. Crop production, seed processing, and biodiesel production all require energy. Further study is required to understand the extent to which on-farm oilseed and biodiesel production processes can use renewable, farm-produced energy, to yield an even greater net energy savings to the farm.

7. Conduct further research on additional potential markets for oilseed co-products. The following potential markets for oilseed co-products were beyond the scope of this study, but should be investigated further:



 

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