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 Plasma-zapping process could yield trans fat-free soybean oil product
02.12.2016 | Purdue University

nachricht New findings about the deformed wing virus, a major factor in honey bee colony mortality
11.11.2016 | Veterinärmedizinische Universität Wien

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: Traffic jam in empty space

New success for Konstanz physicists in studying the quantum vacuum

An important step towards a completely new experimental access to quantum physics has been made at University of Konstanz. The team of scientists headed by...

Im Focus: How gut bacteria can make us ill

HZI researchers decipher infection mechanisms of Yersinia and immune responses of the host

Yersiniae cause severe intestinal infections. Studies using Yersinia pseudotuberculosis as a model organism aim to elucidate the infection mechanisms of these...

Im Focus: Interfacial Superconductivity: Magnetic and superconducting order revealed simultaneously

Researchers from the University of Hamburg in Germany, in collaboration with colleagues from the University of Aarhus in Denmark, have synthesized a new superconducting material by growing a few layers of an antiferromagnetic transition-metal chalcogenide on a bismuth-based topological insulator, both being non-superconducting materials.

While superconductivity and magnetism are generally believed to be mutually exclusive, surprisingly, in this new material, superconducting correlations...

Im Focus: Studying fundamental particles in materials

Laser-driving of semimetals allows creating novel quasiparticle states within condensed matter systems and switching between different states on ultrafast time scales

Studying properties of fundamental particles in condensed matter systems is a promising approach to quantum field theory. Quasiparticles offer the opportunity...

Im Focus: Designing Architecture with Solar Building Envelopes

Among the general public, solar thermal energy is currently associated with dark blue, rectangular collectors on building roofs. Technologies are needed for aesthetically high quality architecture which offer the architect more room for manoeuvre when it comes to low- and plus-energy buildings. With the “ArKol” project, researchers at Fraunhofer ISE together with partners are currently developing two façade collectors for solar thermal energy generation, which permit a high degree of design flexibility: a strip collector for opaque façade sections and a solar thermal blind for transparent sections. The current state of the two developments will be presented at the BAU 2017 trade fair.

As part of the “ArKol – development of architecturally highly integrated façade collectors with heat pipes” project, Fraunhofer ISE together with its partners...

All Focus news of the innovation-report >>>

Anzeige

Anzeige

Event News

Sustainable Water use in Agriculture in Eastern Europe and Central Asia

19.01.2017 | Event News

12V, 48V, high-voltage – trends in E/E automotive architecture

10.01.2017 | Event News

2nd Conference on Non-Textual Information on 10 and 11 May 2017 in Hannover

09.01.2017 | Event News

 
Latest News

New Study Will Help Find the Best Locations for Thermal Power Stations in Iceland

19.01.2017 | Earth Sciences

Not of Divided Mind

19.01.2017 | Life Sciences

Molecule flash mob

19.01.2017 | Physics and Astronomy

VideoLinks
B2B-VideoLinks
More VideoLinks >>>