Economic analysis of private and public benefits of corn, switchgrass and mixed grass systems in Eastern South Dakota

The objective of this research is to develop an economic analysis of different crop mix biofuels programs for meeting ethanol and sustainability demands. Primary data are from South Dakota State University field experiments on farms located in east-central South Dakota. The data include 4 years of field data, three crop systems (mixed grass, switchgrass and corn), two residue treatments (no removal, removal of biomass), and three landscape positions (back slope, crest and foot slope). A representative farm model and five scenarios are developed to conduct a full budget analysis over a 12-year period. Public benefits are evaluated, using the benefit transfer method to value ecosystem services, by allocating a dollar value to three environmental variables; carbon sequestration, reduction of sedimentation and pheasant production. Stochastic simulation results are compared for each of the five scenarios, one with only annualized net private returns, and one including the value of environmental benefits. Results indicate that: (1) the conventional continuous corn scenario has the highest net returns over the 12-year budget, (2) carbon sequestration represents 80% of the environmental benefits, and (3) the added economic value of ecosystem services does not provide enough incentives for farmers to convert from corn production to grass production.