Forum for Science, Industry and Business

Sponsored by:     3M 
Search our Site:

 

Optimizing biofuel supply chain is a competitive game

19.04.2012
As biofuel production has increased – particularly ethanol derived from corn – a hotly contested competition for feedstock supplies has emerged between the agricultural grain markets and biofuel refineries.

This competition has sparked concern for the more fundamental issue of allocating limited farmland resources, which has far-reaching implications for food security, energy security and environmental sustainability.

Numerous studies of land use, food prices, environmental impact and more have fed the so-called “food versus fuel” debate. However, according to new models created by University of Illinois researchers, most studies so far have overlooked a key factor: selfish and possibly competing interests of the biofuel industry and individual farmers, who independently seek the most profit from their crops.

“We looked at competition among farmers and between the refinery and the food market and put them into one model to optimize the whole system,” said Yanfeng Ouyang, a professor of civil and environmental engineering. “A lot of researchers now working on biofuel supply chain optimization have not been able to develop a holistic model that can address such complex interactions among multiple stakeholders in a comprehensive framework.”

Most such studies have assumed that farmers act collectively or in corporation, but in reality each farmer is competing for his own market share. Farmers individually have a choice to sell to the grain market, to the refineries or to some combination of the two, based on the price at each outlet and the cost of transportation. Furthermore, refineries have finite capacities, so farmers are competing with each other to sell to them. The grain market, too, has its limits: If the grain market is flooded with excess corn, prices drop. In turn, refineries can then offer lower prices for ethanol corn.

“At the end of the day, how much a farmer produces to sell to the market depends on the market price of the corn,” said Jong-Shi Pang, the Caterpillar Professor and the head of industrial and enterprise systems engineering at the U. of I. “The farmers need to take into account what the refinery is offering to them but at the same time also be mindful of their production. The amount sold to the market determines the price on the market, which in turn influences everyone’s production. That’s the kind of decision-making problems that all the players have to resolve.”

Taking these complicated competing interests into account, the U. of I. team developed models of the system, using corn production and sales in Illinois as a case study. They published their findings in the journal Energy Economics.

The researchers applied the models to various business scenarios; for example, farmers cooperating with the biofuel industry through farmland leasing or acquisition. The estimated improvement in overall system profit can provide guidelines for how much effort stakeholders should invest to achieve such business scenarios.

The models provide guidelines for optimizing the biofuel supply chain – where to place biorefineries and what capacities to assign them to maximize profit. The researchers considered the delicate balance such refineries must strike: Pay the farmers enough to persuade them to sell, but not so much that it cuts into their own profits. Location and price are two important factors guiding a farmer’s decision to sell to the refinery.

The researchers also used their models to quantitatively evaluate the effect on farmers and food prices when a biofuel supply chain is introduced to a market. They found that diverting some of the corn crop to ethanol affects food prices to varying degrees. However, the overall system welfare improved, with farmers being the primary beneficiaries.

“We do see that the competition is likely to bring benefit to the farmers,” Ouyang said. “The farmers used to have to sell to the grain markets; now they have more alternatives. They can do further bidding and negotiating.”
The researchers will continue to refine their models, adding additional considerations such as environmental impact, production fluctuations, land-use diversity and crop rotation. They also hope to design mechanisms to drive
self-interested stakeholders toward socially desirable business practices.
Graduate student Yun Bai was the lead author of the paper. The National Science Foundation supported this work.
Editor’s notes: To contact
Jong-Shi Pang, call 217-244-5703; email jspang@illinois.edu
Yanfeng Ouyang: 217-333-9858; yfouyang@illinois.edu
The paper, “Biofuel Supply Chain Design Under Competitive Agricultural Land Use and Feedstock Market Equilibrium,” is available online:

http://www.sciencedirect.com/science/article/pii/S0140988312000047

Liz Ahlberg | University of Illinois
Further information:
http://www.illinois.edu

More articles from Agricultural and Forestry Science:

nachricht Microjet generator for highly viscous fluids
13.02.2018 | Tokyo University of Agriculture and Technology

nachricht Sweet route to greater yields
08.02.2018 | Rothamsted Research

All articles from Agricultural and Forestry Science >>>

The most recent press releases about innovation >>>

Die letzten 5 Focus-News des innovations-reports im Überblick:

Im Focus: In best circles: First integrated circuit from self-assembled polymer

For the first time, a team of researchers at the Max-Planck Institute (MPI) for Polymer Research in Mainz, Germany, has succeeded in making an integrated circuit (IC) from just a monolayer of a semiconducting polymer via a bottom-up, self-assembly approach.

In the self-assembly process, the semiconducting polymer arranges itself into an ordered monolayer in a transistor. The transistors are binary switches used...

Im Focus: Demonstration of a single molecule piezoelectric effect

Breakthrough provides a new concept of the design of molecular motors, sensors and electricity generators at nanoscale

Researchers from the Institute of Organic Chemistry and Biochemistry of the CAS (IOCB Prague), Institute of Physics of the CAS (IP CAS) and Palacký University...

Im Focus: Hybrid optics bring color imaging using ultrathin metalenses into focus

For photographers and scientists, lenses are lifesavers. They reflect and refract light, making possible the imaging systems that drive discovery through the microscope and preserve history through cameras.

But today's glass-based lenses are bulky and resist miniaturization. Next-generation technologies, such as ultrathin cameras or tiny microscopes, require...

Im Focus: Stem cell divisions in the adult brain seen for the first time

Scientists from the University of Zurich have succeeded for the first time in tracking individual stem cells and their neuronal progeny over months within the intact adult brain. This study sheds light on how new neurons are produced throughout life.

The generation of new nerve cells was once thought to taper off at the end of embryonic development. However, recent research has shown that the adult brain...

Im Focus: Interference as a new method for cooling quantum devices

Theoretical physicists propose to use negative interference to control heat flow in quantum devices. Study published in Physical Review Letters

Quantum computer parts are sensitive and need to be cooled to very low temperatures. Their tiny size makes them particularly susceptible to a temperature...

All Focus news of the innovation-report >>>

Anzeige

Anzeige

VideoLinks
Industry & Economy
Event News

2nd International Conference on High Temperature Shape Memory Alloys (HTSMAs)

15.02.2018 | Event News

Aachen DC Grid Summit 2018

13.02.2018 | Event News

How Global Climate Policy Can Learn from the Energy Transition

12.02.2018 | Event News

 
Latest News

Japanese researchers develop ultrathin, highly elastic skin display

19.02.2018 | Information Technology

Dispersal of Fish Eggs by Water Birds – Just a Myth?

19.02.2018 | Ecology, The Environment and Conservation

Studying mitosis' structure to understand the inside of cancer cells

19.02.2018 | Life Sciences

VideoLinks
Science & Research
Overview of more VideoLinks >>>