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: Electron highway inside crystal

Physicists of the University of Würzburg have made an astonishing discovery in a specific type of topological insulators. The effect is due to the structure of the materials used. The researchers have now published their work in the journal Science.

Topological insulators are currently the hot topic in physics according to the newspaper Neue Zürcher Zeitung. Only a few weeks ago, their importance was...

Im Focus: Significantly more productivity in USP lasers

In recent years, lasers with ultrashort pulses (USP) down to the femtosecond range have become established on an industrial scale. They could advance some applications with the much-lauded “cold ablation” – if that meant they would then achieve more throughput. A new generation of process engineering that will address this issue in particular will be discussed at the “4th UKP Workshop – Ultrafast Laser Technology” in April 2017.

Even back in the 1990s, scientists were comparing materials processing with nanosecond, picosecond and femtosesecond pulses. The result was surprising:...

Im Focus: Shape matters when light meets atom

Mapping the interaction of a single atom with a single photon may inform design of quantum devices

Have you ever wondered how you see the world? Vision is about photons of light, which are packets of energy, interacting with the atoms or molecules in what...

Im Focus: Novel silicon etching technique crafts 3-D gradient refractive index micro-optics

A multi-institutional research collaboration has created a novel approach for fabricating three-dimensional micro-optics through the shape-defined formation of porous silicon (PSi), with broad impacts in integrated optoelectronics, imaging, and photovoltaics.

Working with colleagues at Stanford and The Dow Chemical Company, researchers at the University of Illinois at Urbana-Champaign fabricated 3-D birefringent...

Im Focus: Quantum Particles Form Droplets

In experiments with magnetic atoms conducted at extremely low temperatures, scientists have demonstrated a unique phase of matter: The atoms form a new type of quantum liquid or quantum droplet state. These so called quantum droplets may preserve their form in absence of external confinement because of quantum effects. The joint team of experimental physicists from Innsbruck and theoretical physicists from Hannover report on their findings in the journal Physical Review X.

“Our Quantum droplets are in the gas phase but they still drop like a rock,” explains experimental physicist Francesca Ferlaino when talking about the...

All Focus news of the innovation-report >>>

Anzeige

Anzeige

Event News

ICTM Conference 2017: Production technology for turbomachine manufacturing of the future

16.11.2016 | Event News

Innovation Day Laser Technology – Laser Additive Manufacturing

01.11.2016 | Event News

#IC2S2: When Social Science meets Computer Science - GESIS will host the IC2S2 conference 2017

14.10.2016 | Event News

 
Latest News

Researchers identify potentially druggable mutant p53 proteins that promote cancer growth

09.12.2016 | Life Sciences

Scientists produce a new roadmap for guiding development & conservation in the Amazon

09.12.2016 | Ecology, The Environment and Conservation

Satellites, airport visibility readings shed light on troops' exposure to air pollution

09.12.2016 | Health and Medicine

VideoLinks
B2B-VideoLinks
More VideoLinks >>>