Potential For A Sugar Beet Ethanol Industry in Washington State
Potential For A Sugar Beet Ethanol Industry in Washington State
Industry in Washington State
Report to the Washington State Department of Agriculture
March 1, 2009
Jonathan Yoder, Project Leader
School of Economic Sciences
Washington State University
Contact information:
[email protected]
(509)335‐8596
http://www.ses.wsu.edu/People/Yoder.htm
Douglas Young
School of Economic Sciences
Washington State University
Kathleen Painter
Agricultural Economics and Rural Sociology
University of Idaho
Jie Chen
Biological Systems Engineering
Washington State University
Joan Davenport
Crop and Soil Sciences
Washington State University
Suzette Galinato
School of Economic Sciences
Washington State University
This research was supported by the state of Washington through contract 109852
managed by the Washington State Department of Agriculture. Additional funding and
support was provided by the Washington Agricultural Research Center under project
number WNP00539. We thank Herb Hinman, Tim Waters, Paul Patterson, Warren
Shoemaker, Wes Locke, and Richard Koenig for helpful information. We also thank Laci
Graciano for administrative support.
1
Executive Summary
This report provides an assessment of the potential for the development of an ethanol
industry in Washington State based on sugar beets as a feedstock.
Current sugar beet production in Washington State is small, and essentially no ethanol
for fuel is produced in the state. Existing markets for sugar beets, sugar, and ethanol
provide evidence of the difficult economic realities to be overcome for the use of sugar
beets to produce ethanol in Washington State. First, Washington currently produces only
one fourth of one percent of the nation’s sugar beets. Nationwide, sugar beets provide
almost 60 percent of all sugar produced in the U.S., but most sugar beets are grown
elsewhere, such as the upper Midwestern states. This current market reality suggests that
Washington State has a comparative advantage at producing agricultural commodities
other than sugar beets, whereas other states are better suited for sugar beet production.
Washington’s remaining 1,600 acres of sugar beets are produced on a large corporate farm
in Benton County with atypically favorable transport and contract arrangements, low input
costs, and rotation benefits with contracted onions. This special case is not transferable to
wide scale production of beets in Washington’s Columbia Basin.
Second, based on current average input costs and beet prices, sugar beet production fails
to cover total production costs in Washington, even without considering the high cost of
transportation to an Idaho sugar plant. This suggests the need for a large change in the
sugar beet market conditions permitting both (1) farm level profitability and (2) ethanol or
sugar profitability to justify a local processor in Washington. Longer term projections
show that sugar beets are not likely to compete effectively against other irrigated crops
available to Washington farmers in the next few years.
Third, although sugar beets are used to some extent for ethanol production in Europe
(notably France), no ethanol is currently produced from sugar beets in the U.S. Instead, 97
percent of ethanol produced in the U.S. is produced from corn. This suggests that corn is
better suited for ethanol production given current U.S. market conditions and policy.
Indeed, existing studies including our analysis show that for current technologies and
markets, ethanol production from sugar beets is substantially more costly than from corn.
Fourth, ethanol production in the United States has increased substantially in the last
five years, but to date, Washington State produces no ethanol for fuel. This reality follows
to a large degree from the fact that the current primary feedstock ‐‐‐ corn ‐‐‐ is costly to
produce here relative to the Midwest, and there are economies of proximity between
feedstocks and ethanol production facilities. Corn ethanol dominates sugar beet ethanol in
ii
the U.S. on a cost basis in current and foreseeable market conditions, and even corn ethanol
is showing itself to be more readily produced elsewhere in the U.S. relative to Washington.
These four current market realities together suggest that the potential development of a
sugar beet ethanol industry in Washington State faces very substantial challenges.
Nonetheless, technological innovations might improve prospects for growth in both the
sugar beet and the ethanol industry in the state. For example, there are some prospects for
improving sugar beet sugar yields for ethanol production. We summarize a production
process for ethanol from sugar beets that may slightly improve economic competitiveness
over the more established sugar beet ethanol processing approaches. In particular, based
on a new technological approach for utilizing beet pulp as a feedstock for ethanol via
hydrolysis, (in addition to the sucrose content of beets), we find modest potential cost
reductions for ethanol production over current methods. However, this process still does
not compete with corn ethanol in terms of production costs. Further, other states with
greater relative advantage in sugar beet production could also exploit these innovations,
increase production, and decrease beet prices to the disadvantage of a marginal producer
like Washington. In the context of emerging markets and increasingly supportive federal
renewable energy policy, there may be opportunities for Washington State to develop
biofuel industries, but at this point, they appear more likely to be based on feedstocks other
than sugar beets, unless there are substantial changes to corn, ethanol, sugar, and oil
markets and policy jointly in favor of sugar beet ethanol markets.
iii
Table of Contents
Executive Summary ........................................................................................................................................... ii
Introduction .......................................................................................................................................................... 1
World and national sugar beet and ethanol market overview ........................................................ 2
Government policy .............................................................................................................................................. 5
Sugar beet industry in Washington State ................................................................................................. 7
Historical and current sugar beet production in Washington State ............................................. 7
Breakeven yields, transportation costs, and other yield considerations .................................... 8
Estimated costs and returns for producing sugar beets in the Columbia Basin,
Washington: Enterprise budget for 2008 ........................................................................................ 12
Relative profitability of sugar beets and Washington’s other irrigated crops ....................... 16
Economic potential for ethanol production from sugar beets ..................................................... 18
Ethanol plant projects in Washington ..................................................................................................... 19
The economic costs of producing sugar beet ethanol ...................................................................... 22
Sugar beet processing for ethanol .................................................................................................. 24
Enterprise budget for sugar beet ethanol ................................................................................... 26
Assessment of infrastructure needs ........................................................................................................ 28
Potential contribution to rural economic development ................................................................. 29
Conclusion .......................................................................................................................................................... 30
References .......................................................................................................................................................... 32
Appendix A. Relationship between transportation costs and breakeven yields. ............... 36
Appendix B: Details of sugar beet enterprise budget ..................................................................... 38
iv
List of Figures
Figure 1: U.S. production of sugar beets (‘000 tons) by region, 4‐year average, 1980‐2007.
Sources: Haley and Ali (2007), USDA ERS (2008)...................................................................................... 3
Figure 2: Capacity of sugar beet processing plants by region (tons per day), 1992‐2006.
Source: Haley and Ali (2007). ............................................................................................................................. 3
Figure 3: World and U.S. refined sugar market prices (cents per pound), 1988‐2007. Source:
USDA ERS (2008), Tables 2 and 5. .................................................................................................................... 4
Figure 4: Sugar beet production in Washington State. Source: USDA‐NASS (2008b) ..................... 8
Figure 5: Relationship between yield potential of different areas in the state and total sugar
beet acres in the presence of high transportation costs. ...................................................................... 10
Figure 6: Sugar beet ethanol production flowchart. Stenzel et al. (1980) describes the method
for processing ethanol from raw juice and dry pulp from wet pulp. The hydrolysis of wet
pulp for ethanol is based on Aden et al. (2002). ...................................................................................... 25
v
List of Tables
Table 1: Leading international producers of potential crop biofuel feedstocks, 2007 ............... 5
Table 2: Four year average sugar beet acreage, production, and yield in the US, 2003 –
2006 (NASS, 2008b). .......................................................................................................................................... 9
Table 3: Schedule of operations for irrigated sugar beets following onions, Columbia Basin,
WA. ......................................................................................................................................................................... 14
Table 4: Summary of costs and returns for irrigated sugar beet production following onions
in the Columbia Basin ($/acre) .................................................................................................................. 15
Table 5: Breakeven selling prices ($/ton) at given different yields ................................................. 15
Table 6: Adequacy of WA canola, sugar beet and corn production to meet specified demands
.................................................................................................................................................................................. 18
Table 7: Change in status of WA ethanol plants from 2007 to 2008 (Source: Yoder et al.
2008 as derived from Lyons. Biofuel Development in Washington, WSU Extension
Energy Program, 2007 and 2008). ........................................................................................................... 20
Table 8: Comparison of estimated ethanol production costs for various feedstocks ($/gal.)1.
Source: adapted from table 25 and 18, USDA (2006). ..................................................................... 22
Table 9: Total Project Investment (TPI) estimation ............................................................................... 26
Table 10: Production cost estimates for beet pulp as ethanol feedstock option. Dollars per
gallon of ethanol produced. ......................................................................................................................... 27
Table 11: Summary of sugar beet production cost estimation .......................................................... 28
vi
Introduction
In the 2007‐09 operating budget, the legislature appropriated $125,000 to the
Department of Agriculture for a study to evaluate the use of sugar beets for the production
of biofuels (Sec 309, Chapter 522, Laws of 2007). Legislative intent for the study was
provided in SB 6056, introduced in the 2007 legislative session. Based on SB 6056, WSDA
entered into an interagency agreement with WSU to conduct a study that evaluates the
following:
(a) Assessment of the current sugar beet production in the state;
(b) Suitability of growing conditions in the most promising regions of the state;
(c) Expected fuel yield per acre in relation to other potential feedstocks;
(d) Economic feasibility of growing sugar beets for production of biofuels:
1. Generate one or more enterprise budgets for sugar beet production;
2. Generate implied value of delivered sugar beets for use in ethanol production;
3. Assess the costs of transportation and storage;
(e) Analysis of the infrastructure needed such as processing plants, storage facilities, and
machinery;
(f) The potential contributions to rural economic development.
As their name suggests, sugar beets are high in sugar content, which make them a
potentially promising candidate as a feedstock for ethanol production. This effort entails
an examination of the costs of sugar beet production (the supply side), an analysis of the
value of sugar beets as an input to the production of ethanol (the demand side), and an
analysis of the storage and transportation logistics associated with the use of sugar beets
for ethanol production.
Sugar beets were produced on 62,000 to 92,000 acres over 1970‐1978 in six counties in
south central Washington. During the late 1990s, beets were produced on 13,000 to
36,000 acres (USDA‐NASS 2009). In recent years, all of Washington’s sugar beets have
been produced on a large corporate farm in Benton County along the Columbia River.
These beets are shipped to Nampa, Idaho, for sugar production. Only 1,600 acres of sugar
beets were produced in the state in 2008.
Washington State legislators and the Governor have been introducing legislation to
develop in‐state production of biofuels to help promote energy independence, support the
Washington economy, and promote environmentally friendly energy use. Currently,
Washington State imports most of the biofuels consumed in this state, and imports virtually
all feedstocks for biofuels produced in this state.
The remainder of the introductory section provides a summary of world, national, and
Washington markets for sugar beets, ethanol, and other important potential ethanol
1
feedstocks. This summary also includes an overview of world and national market
statistics and a discussion of relevant policy relating to sugar and ethanol markets.
The next section provides an analysis of Washington sugar beet production and
potential. We begin with a historical description of Washington sugar beet production. To
help interpret historical yields, we examine the relationship between breakeven sugar beet
yields and transportation costs. These discussions are followed by a new enterprise budget
for Washington sugar beet production (excluding transportation costs to a processing
plant), and we complete the section by examining the relative profitability of sugar beets in
Washington compared to other irrigated crops based on a linear programming model.
The subsequent section focuses on ethanol production from beets. It describes the stage
of development of ethanol plants in the state, and develops and interprets an enterprise
budget for sugar beet ethanol production.
The final three sections provide an assessment of infrastructure needs, the potential for
rural economic development from sugar beet ethanol industry development, and a
conclusion.
World and national sugar beet and ethanol market overview
Nearly 80 percent of the world’s sugar is made from sugar cane grown in tropical and
sub‐tropical regions of the southern hemisphere, where the leading producers include
Brazil, India, China, Thailand, Mexico and Australia. The remainder comes from sugar beets
grown in cooler regions of the northern hemisphere. Between 2000 and 2006, the top ten
sugar beet‐producing countries in the world were France, United States, Germany, Russia,
Ukraine, Turkey, Poland, Italy, China and United Kingdom (UN FAO 2008).
In the United States, sugar beets are historically grown in 15 states grouped in five
regions: Great Lakes (Michigan, Ohio); Upper Midwest (Minnesota, North Dakota); Great
Plains (Colorado, Montana, Nebraska, New Mexico, Texas, Wyoming); Northwest (Idaho,
Oregon and Washington); and Southwest (Arizona, California). However, production of
beets ceased in Arizona, Ohio, New Mexico and Texas between 1983 and 2005 (Haley and
Ali 2007; USDA ERS 2008) (Figure 1).
The average U.S. sugar beet production and yield in 2007 were about 32 million tons and
25 tons per acre, respectively. Since 2000, annual growth has averaged 0.12 percent in
production and 1.45 percent in yield. Production has been largest in the Upper Midwest,
with an average annual growth of 5 percent between 1980 and 2007. Sugar beet
production increased in the Northwest until 1996, but has declined since that year.
2
Production declines have also 18,000
occurred in the Great Lakes, Great 16,000
Plains, and especially in the 14,000
Southwest. 1 12,000
1980-1983
1984-1987
Sugar beets are processed to
thousand tons
10,000 1988-1991
1992-1995
recover sugar, and the farm price
1996-1999
8,000
2000-2003
2004-2007
and economic value of sugar beets 6,000
depends on their sucrose content. 4,000
This implies that the viability of 2,000
growing the sugar crops depends on 0
the profitability of sugar processing,
Great Lakes Upper Midwest Great Plains Nortwest Southwest
and vice versa. Furthermore, Figure 1: U.S. production of sugar beets (‘000 tons)
proximity of the production areas to by region, 4‐year average, 1980‐2007. Sources: Haley
a processing facility is important and Ali (2007), USDA ERS (2008).
because sugar beets must be
processed into sugar soon after 70000
they are harvested in order to 60000
minimize sucrose deterioration. If a
facility were to shut down, the 50000
grower has two options: find an 40000
1992
tons per day
1995
alternative facility that is in close 1998
2001
2004
proximity for the crop, or cease
30000
2006
production. Figure 2 shows the 20000
capacity of sugar beet factories in
10000
the five regions. Capacity has
expanded in the Upper Midwest 0
Great Lakes Upper Midwest Great Plains Nortwest Southwest
but contracted in other regions
particularly in the Southwest. 2 Figure 2: Capacity of sugar beet processing
Sugar beets are produced under plants by region (tons per day), 1992‐2006.
contract between individual growers Source: Haley and Ali (2007).
1 In California, the sugar beet industry suffered from drought, disease and other problems in the 1990s
and early 2000. From an average of about 129,000 acres devoted to sugar beet production in the 1990s,
planted area declined to 98,000 acres in 2000 and to 39,500 acres in 2007.
2 Between the 1993 and 1995 harvests, three of California’s eight sugar processing plants closed. Only
two factories were left by 2001, both owned currently by Southern Minnesota Beets Sugar Cooperative
(Advameg Inc. 2007; Haley and Ali 2007).
3
and the processing company,
with the grower receiving a
share of the returns from the
sale of sugar. In 2006, there
were 19 processing facilities
operated by farmer‐
cooperatives: four in North
Dakota; three each in Idaho,
Minnesota and Wyoming; two
facilities, each in California and
Montana; and one each in
Colorado and Nebraska (Haley
and Ali 2007). In 1992, there
were 36 sugar beet factories in
12 states with a total daily Figure 3: World and U.S. refined sugar market prices
capacity of 182,000 tons of (cents per pound), 1988‐2007. Source: USDA ERS
beets. Seventeen sugar (2008), Tables 2 and 5.
processing plants disappeared
between 1992 and 2006.
Prices for the end product of a production process ‐‐‐ sugar or ethanol, for example ‐‐‐
drive the intermediate demand for sucrose, and therefore the demand for sugar beets.
Figure 3 shows the prices of refined sugar in the U.S. and in the international market. U.S.
wholesale refined beet sugar prices have ranged from $0.22 per pound ($440 per ton) to
$0.36 per pound ($720 per ton) during 1988 to 2007 (USDA ERS 2008). These prices, on
average, are more than double the world prices for refined sugar during the same period,
largely due to the U.S. sugar program (Haley 2009). Hence, the opportunity cost of using
sugar beets for ethanol is high because of the elevated price for refined sugar. This alone
implies that the sugar beet is an expensive feedstock for ethanol production because
processors can fetch a high price for their alternative use in refined sugar.
Table 1 provides a summary of major biofuel feedstocks and their major producers.
Ethanol is produced in many countries. The dominant producers are Brazil and the United
States, each representing 36 percent and 34 percent of the world ethanol production,
respectively, in 2005. While Brazil uses sugarcane and molasses as feedstock for producing
ethanol, the United States mainly uses (shelled) corn, which accounts for about 97 percent
of ethanol production. The remaining quantity of ethanol is produced from other
feedstocks, including sorghum, whey and beverage waste (USDA 2006). At present, the
United States does not utilize sugar crops (sugar cane or sugar beets) as primary
feedstocks.
4
Table 1: Leading international producers of potential crop
biofuel feedstocks, 2007
Crop Country Prod.1 Crop Country Prod.1
___________Ethanol___________ ___________Biodiesel____________
Corn USA 332 Soy‐ USA 71
China 152 beans Brazil 58
Brazil 52 Argentina 46
Mexico 23 China 16
Sugar Brazil 514 Oil Malaysia 75
Cane India Palm Indonesia
335 70
Fruit
China 106 Nigeria 8
Thailand 64 Thailand 7
Sugar France 32 Canola China 10
Beets USA 32 (Rape‐ Canada 9
Russia 29 seed) India 7
Germany 26 Germany 5
1Prod=production in million metric tons. Source: UN‐FAO (2008).
Note that not all of these feedstocks are used for biofuel production.
For example, essentially none of the sugar beets produced in the
United States are used for biofuel production.
Government policy
Government policies throughout the world have also been instrumental at promoting
the production and use of ethanol. In Brazil, for example, the National Alcohol Program
(Pró‐Álcool, initiated in 1975) provides incentives for greater use of ethanol and is used as
an instrument to help regulate the ethanol content in the gasoline blend. Currently, Pró‐
Álcool (Decree No. 76.593) sets the ethanol content in gasoline at 25 percent. This policy is
determined through a close coordination among different government ministries,
sugarcane farmers, automobile industry, fuel distributors and gas stations (USDA ERS
2007; WRI 2008).
In the European Union, the European Commission (EC) is using both legislation and
formal directives to promote biofuel production and use within the member states
(Schnepf 2006). Three directives were approved in 2003: (i) Energy Taxation Directive,
where tax is reduced or exempted for renewable fuels under certain conditions; (ii) Fuel
Quality Directive, where limits on biodiesel blending are set to no more than 5 percent
share by volume for technical reasons; and (iii) Biofuels Use Directive, where member states
have agreed to meet certain aggregate minimum blend requirements.
5
EU member states are free to implement their own biofuel‐related policies. An example
is the Renewable Transport Fuel Obligation (RTFO) that was enforced in the United
Kingdom on April 2008. The RTFO requires that 2.5 percent of all retail fuel come from
sustainable renewable sources in 2008, 3.75 percent in 2009 and 5 percent by 2010‐2011
(Kallal 2007). As a step toward achieving this, the first sugar beet ethanol plant in the
United Kingdom was officially opened in November 2007. The plant is located in
Wissington, Norfolk and operated by British Sugar. It has a capacity to produce 18.5 million
gallons of ethanol a year from locally produced sugar beets (Down to Earth 2008).
Federal and state government policies, such as renewable fuel standards (RFS), fuels
taxes and tax credits, influence the use of renewable energy sources for fuel in the U.S. The
federal Energy Policy Act of 2005 (EPAct 2005, P.L. 110‐58) and The Energy Security and
Independence Act of 2007 (P.L. 110‐140, H.R. 6), hereafter the EISA, together mandate
consumption requirements for biofuels. 3 The requirements increase to 36 billion gallons
in 2022, with requirements conditional on fuel type and carbon emissions characteristics.
In particular, the corn ethanol contribution to the RFS is capped at 15 billion gallons per
year beginning in 2015, with the remainder being advanced biofuels such as cellulosic
ethanol.
The primary elements of Washington State policy applying specifically to biofuels are a
set of tax incentives, a renewable fuel standard, and a fund for awarding competitive grants
for research and development of technology, facilities, and infrastructure for various
renewable energy sources including biofuels. A summary of biofuel incentives and policy is
provided by BioEnergy Washington (2008).
Federal sugar policy is the primary reason that U.S. sugar prices are much higher than
world prices (Jurenas 2007), and this affects the competitiveness of ethanol processing to
be able to compete with sugar processors for the purchase of sugar beets. U.S. support
policies include the use of non‐recourse loans that basically allow sugar processors to sell
sugar to the federal government if the market price for sugar is lower than a fixed loan rate
(22.9 cents for sugar beets until 2008). The sugar program also uses marketing allotments
and stringent import quotas to keep domestic beet sugar prices at no less than 23.5 cents
(Jurenas 2007). The sugar price support program was reauthorized in the 2008 Farm Bill,
with some modification. First, the loan rate is set to increase by ¼ cent increments from
22.90 cents for 2009 to 24.09 cents in 2013 to compensate for a relaxation of restrictions to
Central American sugar imports due to other trade agreements, and the development of a
3 A host of information about the Federal RFS is available at
http://www.epa.gov/otaq/renewablefuels/index.htm#regulations.
6
sugar‐to‐ethanol program (Jurenas 2008). The sugar‐to‐ethanol program is also designed
to compensate for the relaxation of Central American import restrictions. This program
will sell federally owned surplus sugar (from the loan program) primarily to ethanol
producers. According to Jurenas (2008), there is some concern that this program will lead
to net subsidization of sugar and processing (to date, the sugar program is basically
revenue‐neutral by law), because the value of processed sugar for ethanol production is
substantially lower than the loan rate. 4
The increase in the loan rates from 22.90 to 24.09 cents over the next five years basically
increases the minimum prices received by processors for sugar. The sugar‐to‐ethanol
program itself (given the other program elements) will likely not have an effect on sugar
prices, and so will not affect revenue potential for sugar processors. In any case, high
prices for sugar imply that the value of sugar beets for sugar production is higher than it
would otherwise be. This in turn means that the opportunity cost of using sugar beets for
ethanol is higher than it would otherwise be without the sugar program. The increase in
loan rates over the next few years will likely exacerbate this outcome.
Sugar beet industry in Washington State
This section describes the history of Washington’s sugar beet industry. It also outlines
the basic accounting relationship between breakeven yields for a crop and transport costs
to a processing plant. Furthermore, the section provides an enterprise budget on sugar
beet production costs in Washington without consideration of transportation costs.
Finally, recent projections of relative profitability of sugar beets versus other irrigated
crops in Washington are provided.
Historical and current sugar beet production in Washington State
Sugar beet production has fluctuated greatly in Washington State over the last 50 years.
As shown in Figure 4, the major fluctuations were closely related to whether or not
processing facilities were in operation or expected to come online. Until 1978, sugar beets
were produced in Franklin, Grant, Adams, Walla Walla, Yakima, Benton and Klickitat
Counties (USDA‐NASS 2009b). Washington produced 1.5 to 2.5 million tons
(60,000‐90,000 acres) of sugar beets annually during 1970‐1978. This represented 4% to
7% of U.S. sugar beet production at the time. Following the closure of the Utah & Idaho
4 Sugar consumers in the U.S. pay more for sugar. Jurenas (2007) mentions studies estimating the extra
cost to American sugar consumers at between $400 million and $1.9 billion annually.
7
Sugar plant in 1978‐79,
production essentially ceased
until the late 1990’s (USDA‐
NASS 2008b).
In the late 1990s through
the year 2000, sugar beets
were grown in Franklin, Grant,
Adams, Benton, Lincoln and
Walla Walla Counties (USDA‐
NASS, various issues). Total
planted area of sugar beets in
1996 increased from 13,000
acres to 37,300 acres in 1998,
and production from about
500,000 tons to 1.2 million
tons. However these figures Figure 4: Sugar beet production in Washington State.
have declined significantly Source: USDA‐NASS (2008b)
since 1999. The increase was
in response to the development of a cooperative sugar plant in Moses Lake, but the plant
went bankrupt (Stevens, personal communication). Faced with high transportation costs to
out‐of‐state processing facilities, production dwindled. Some Columbia Basin farmers went
bankrupt along with the Moses Lake plant when they were not paid for their beets (Waters,
personal communication). For this reason, sugar beets have accrued an unfavorable
economic reputation among some producers in the Basin (Waters, personal
communication).
In 2008, only 1,600 acres of sugar beets were gown in Washington, all in southern
Benton County, with total production of 67,000 tons. The state’s production comprised
only 1.73 percent of the Pacific Northwest’s sugar beet production and 0.24 percent of the
nation’s (USDA‐NASS 2008a). All Washington sugar beets are transported to the
Amalgamated Sugar Company in Idaho, which is owned by the Snake River Sugar Company,
a grower‐owned cooperative. This history suggests, not surprisingly, that extensive,
profitable sugar beet production in Washington is highly dependent on proximate
processing facilities (and the market fundamentals to support them).
Breakeven yields, transportation costs, and other yield considerations
Although Washington State has very little current sugar beet acreage, average sugar beet
yield in Washington is high (USDA‐NASS 2008b). In fact, as shown in Table 2, Washington
has the highest yield along with California for the years 2003‐2006.
8
Several important agronomic and economic factors contribute to this high yield.
Agronomically, irrigation, soil and other conditions in Washington tend to favor high
yielding root crops such as potatoes (Table 2). However, the high sugar beet average yield
is also almost certainly related to the fact that without local facilities to process sugar beets,
only the most competitive of producers can find it profitable to produce sugar beets.
Consider the wide swings in Washington sugar beet acreage illustrated in Figure 4. The
figure shows that for the time period covered by Table 2 (2003‐2006), no local processing
facility existed. Producers have had to transport sugar beets to Nampa, Idaho for
processing, and for this period sugar beet production is very low.
Table 2: Four year average sugar beet acreage,
production, and yield in the US, 2003 – 2006 (NASS,
2008b).
acres tons
Planted Harvested Yield Prod
California 46,775 46,550 38.3 1,787,250
Colorado 35,775 33,300 24.1 801,000
Idaho 190,000 188,250 30.5 5,502,000
Michigan 163,250 161,750 21.2 3,412,500
Minnesota 493,250 473,500 21.7 8,305,750
Montana 53,225 50,500 24.3 1,223,000
Nebraska 51,200 48,250 21.5 1,045,500
North Dakota 199,025 246,750 21.2 5,233,500
Ohio 1,950 1,800 23.0 41,500
Oregon 11,450 11,300 31.1 350,500
United States 1,344,250 1,300,250 23.5 30,557,000
Washington 2,875 2,875 39.0 112,000
Wyoming 37,600 36,325 21.8 790,750
To understand the relationship between average yield and the cost of production,
consider the basic accounting of how transportation costs to a sugar plant influence the
economically viable breakeven yield. The breakeven point is where profits are zero, and
where revenues equal costs, as in (1):
YP − TY − C = 0 , (1)
where Y = yield (tons/ac), P = price ($/ton), T = transportation cost ($/ton) and C= (other)
production costs ($/ac). Solving (1) for the breakeven yield, YBE , in (2):
YBE = C / ( P − T )
. (2)
For a given C, P, and T, if a farm receives (or expects to receive) a yield less than YBE , then
profits will be negative and they would be better off not growing sugar beets. Therefore,
observed yields will tend to be at least YBE. From inspection of (2), the breakeven yield will
9
rise as T rises, because the
denominator on the right hand
side becomes smaller as T rises
relative to P. This is intuitively
reasonable because as
transportation costs to the
sugar plant rise, higher yields
are required in order to bear
these costs. A more rigorous
mathematical derivation in
Appendix A shows that the
breakeven yield is a rising
convex function of
transportation costs. Figure 5: Relationship between yield potential of
Calculations in the appendix different areas in the state and total sugar beet acres in
also show that average sugar the presence of high transportation costs.
beet yields, relative to national
yields, have risen as the vestigial Washington industry has had to truck beets to Nampa, ID
compared to a local Columbia Basin plant during the 1970’s. Equation (1) and the
supporting calculations suggest that the high yield of the small surviving beet industry in
Washington is at least in part a result of the high transportation costs, and not a sign of a
potentially vigorous industry throughout the entire irrigated Columbia Basin. As shown in
Figure 5, the highest yielding niche subregion in the state will tend to bear the high
transportation costs. Others will produce different crops.
A careful case study of the large farm group in southern Benton County that grew all of
Washington’s sugar beets in 2008 provides additional context. The Benton County beet
grower has reportedly arranged extremely favorable hauling rates to Nampa: the sugar
processor bears $23.16/ton of the cost and the grower bears only $7.35/ton (personal
communication, Patterson, U. Idaho Extension, 2/23/09). 5 In contrast, the sugar
processors shoulder only $1.53/ton to $7.10/ton of hauling costs for closer southern Idaho
beet growers. However, the relationship in equation (2) remains true because Benton
County growers still pay $7.36/ton hauling cost to Nampa, versus only $0.32/ton to
$2.36/ton for closer Idaho growers. More importantly, we consider it very unlikely that the
5 The authors did not have access to the large Benton County farm’s exact contract provisions regarding
transport costs, prices, and other factors due to privacy reasons. Consequently, the following discussion
provides the general nature of these provisions based on cited informants.
10
Amalgamated Sugar Company in Nampa would extend such generous transportation cost
sharing to a larger number of growers further to the north in the Columbia Basin if the
Washington beet industry grew significantly. Indeed, if Washington growers were required
to pay total freight costs from the Tri‐Cities to Nampa, the rates could be as high as
$37.65/ton (Khachatryan et al. 2008). These rates would become prohibitive as the
hauling costs approach the contract price of beets.
The Benton County farm might also receive preferential price treatment based on
sucrose content of its beets. The large buying power of this 10,000 acre irrigated farm
permits it to buy inputs at more favorable rates than are available to most farms (personal
communication, Waters, Benton County WA Extension, 2/20/09). From equation (2), it is
apparent that if a particular farm has lower production costs (C), lower transportation
rates (T), and/or a higher price (P), it will be able to survive and possibly prosper with a
lower breakeven yield than most farms. The bottom line is that the small continuing sugar
beet production from a single corporate group in southern Benton County is not likely a
promising model for expanding the industry to Franklin, Grant, Adams, Yakima and
Klickitat Counties to the north where transportation costs will be higher, cost economies
likely lower, and yields possibly lower.
Further, higher gross yield of sugar beets does not necessarily translate to more sugar.
Average sugar content of Washington sugar beets is 17.5% (Kulp and Daniels 2001). Based
on the 4 year yield history of Washington sugar beets, this suggests a sugar yield of 6.82
T/A. In general with sugar beet, N management is held at a level to maximize the sugar
content in the beet (Stevens et al. 2007; Eckhoff and Flynn 2008). However, higher N
applications do increase total beet yield (Stevens et al. 2007). Some data suggest , however,
a negative correlation between beet yield and sucrose content (http://sugarbeet.
ucdavis.edu/Images/table1.gif).
The previously described beet farm in Benton County is a large operation. It can afford
to employ its own agronomist and use some variable rate technology and Roundup Ready
beets. The use of variable rate fertilizer application can provide gains in field‐wide sugar
uniformity with a net reduction of fertilizer inputs, resulting in economic gains to the
farmer (Newcomb et al. 2001). Although studies of variable rate fertilizer management in
sugar beet have not been conducted in Washington, it has been demonstrated that variable
rate pre‐plant nitrogen fertilizer can be advantageous in Washington potato production
(Whitley and Davenport 2003). The use of Roundup Ready sugar beets also can trim
production costs substantially. 6 As such, the large farm can accrue economies of scale
6 100% of Idaho’s sugar beets are now Roundup Ready (Patterson, personal communication).
11
relative to smaller operations that might enter the market if sugar beet production were to
increase.
In speculating about how adoption of productivity‐increasing technologies like these
could boost sugar beet production in Washington, it is important to recognize that these
same technologies are available to other states which have much larger acreages of beets
than Washington. Indeed, if these states adopt these cost‐saving technologies en masse
they could expand supply vigorously and depress prices to make production in Washington
even more marginal.
Estimated costs and returns for producing sugar beets in the Columbia Basin,
Washington: Enterprise budget for 2008
To complement the historical market analysis, we present the results of a recent beet
enterprise budget developed by Hinman, Painter, Waters, and Locke (2009). The budget is
based on modern management used by the previously described large Benton County
grower; however, “average” input costs for the typical grower are used. 7 Further, we omit
transportation costs to a sugar plant to more easily allow an assessment of production
costs independent of the proximity of a processing plant. An atypically favorable transport
contract like that available to the Benton County grower would not likely be available to a
much larger group of growers, but transportation costs would be lower if proximate
processing existed.
Typical or average input prices were obtained from the Idaho Crop Input Summary for 2007
(Patterson 2008), North Dakota State University Weed Management Guide (2008), and
from experts (Wes Locke and Richard Koenig). This budget is based on an interview with
one large producer in southern Benton County, so it should be viewed as a case study
rather than a representative budget for the entire Columbia Basin. The following specific
assumptions were made for the sugar beet enterprise:
• The total farm is assumed to be 5,000 acres, with 500 acres in sugar beet production.
• Annual yield for sugar beets is assumed to be 40 tons per acre. 8
• Crop price is assumed to be $38 per ton, which is based on the contract offer price for
sugar beets in Idaho where nearby processing plants are available (personal
communication, Patterson, U. Idaho Extension, July 8, 2008). This price accounts for
7 Hinman and Kulp (1996) report an enterprise budget for sugar beets for 1996. The enterprise budget
presented here has many of the same characteristics, but has been updated in several ways.
8 Note that this is one ton/acre higher than the state average for 2003‐2006 presented in Table 2.
12
costs of delivery to a receiving station (beet dump) in the general vicinity of the
producing farm. It does not include delivery to the sugar plant.
• All input price assumptions are presented in Appendix B, Table 1. 9
• Sugar beet seeds are Roundup Ready, which have built‐in tolerance for Roundup
herbicide. Using Roundup Ready beets reduces the herbicide passes through the fields
compared to conventional sugar beets. This, in turn, reduces fuel costs and soil
compaction (Wilkins, 2006).
• Cash rent in the Columbia Basin is assumed at $650 per acre based on 2008 cash rent
estimates for this region.
• Machinery costs are based on the Machine Cost program developed by the University of
Idaho. Fixed machinery costs incorporate detailed information on the machinery
complement and complex calculations based on machinery width, tractor horsepower,
type of operation, etc. They are incurred regardless of sugar beet production practices.
These costs will change, however, if the machinery complement is significantly different
from the list in Appendix B, Table 4. The variable costs of machinery, particularly fuel
and machinery repair costs, will be affected by any changes in machinery usage.
• The prevailing interest rate is 9%. These are earnings foregone by investing money in
machinery and buildings rather than the next best alternative. This may also represent
the interest paid on funds borrowed to finance machinery purchases.
• Labor for machinery operation is assumed to cost $20 per hour, including all applicable
taxes and benefits.
• Storage costs are not applicable as the sugar beets are hauled directly from the field to
the neighborhood beet dump.
Detailed data underlying the budget are presented in Appendix B.
Table 3 presents the schedule of field operations by calendar month and type of machine
used, and the cost of materials or services associated with the field operation. Field
preparation takes place from October to March. Sugar beets are planted in late March or
early April, and harvested in October. Harvest operations include removing the beet tops,
then digging the beets and dumping them into 10‐wheeler trucks, which then haul the
beets to the beet dump.
9 During the deflationary conditions of the recession of 2009 some input prices were lower than those
used; however, the prices listed are considered to be normal for more typical conditions.
13
A summary of costs and returns for irrigated sugar beet production is given in Table 4.
Breakeven prices are presented in Table 5. The second breakeven price is what the grower
requires to recover the total costs of production (TC), including cash costs, depreciation,
operator labor, management, and opportunity costs for investments in machinery and
buildings. As shown in Table 5, the price of sugar beets must be about $47/ton in order to
break even with respect to total production costs, given the base yield of 40 tons per acre.
Table 3: Schedule of operations for irrigated sugar beets following onions, Columbia Basin,
WA.
Month Operation Tooling Materials/Service
September Rip 250HP‐WT, 18' Ripper
September Plow 250HP‐WT, 8 Bottom Plow
February/March Soil Sample Custom Soil Sample $50 per 125 acres
March Rip 250HP‐WT, 18' Ripper 1 year in 2 years.
March Disc/Rip 250HP‐WT, 25' Ground Hog
March Bed 180HP‐WT, 22' Bedder
March Fertilize Following onion production, dry
fertilizers not usually needed. Soil
test results will determine rates.
March/April Plant/Herbicide 180HP‐WT, 22' Planter $211/acre seed, Roundup Ready.
Nortron SC 1.1 pts.
April Herbicide Self‐Propelled Sprayer 66', Roundup Power Max 1 qt. $42/gal.
Nurse Truck
May Cultivate 180HP‐WT, 22' Cultivator
May Insecticide Center Pivot Lorsban 1 qt., 1 year in 3 years.
May Herbicide Self‐Propelled Sprayer 66', Roundup Ready Max 1 qt. $42/gal.
Nurse Truck
May Cultivate 180 HP‐WT, 22' Cultivator
May Dammer/Diker 180HP‐WT, 22' Dammer
Diker
May Fertilize Center Pivot/Injection 50 lb N @ $0.70/lb
Pump
May Herbicide Center Pivot Eptam 3 pints + Treflan 1.25 pints
June Fertilize Center Pivot/Injection 50 lb N @ $0.70/lb
Pump
July/August Herbicide Aerial Poast 1.5 pints, 1 year in 4 years.
September Insecticide Center Pivot Asana 5.8 oz, 1 year in 4 years.
October Top Beets 200HP‐WT, 22' Topper
October Dig Beets 200HP‐WT, 6 Row Digger
October Haul Beets to Beet Tandem Axle Trucks
Dump
Season Irrigate Center Pivot 1 irrigator @ $17.50 labor per acre
14
Table 4: Summary of costs and returns for irrigated sugar beet production following
onions in the Columbia Basin ($/acre)
Total
Yield Total Cost Returns Variable Returns
(tons/ Price1 Revenue (TC) over TC Costs (VC) over VC
acre) ($/ton) ($/acre) ($/acre) ($/acre) ($/acre) ($/acre)
Irrigated
Sugar beets 40 $38.00 $1,520 $1,883 ‐$363 $1,116 $404
Based on contract offer for August 2008.
1
If we are to use the base price of $38/ton, the base yield would need to be increased by
about 9.55 tons per acre to break even. If the actual price is greater than the breakeven
level, this means that in addition to covering all costs, a profit is earned for the risk
assumed in producing the crop.
Sugar beets sometimes fit well in rotation with the high value crop potato (Khan 2008),
which requires rotation to other crops for at least 3 years due to disease pressure
(Davenport and Bentley, 2001). Research in Minnesota and North Dakota indicates that
sugar beet yield is greatest when following wheat in rotation and is high when following
corn or potato (Khan 2008). High nitrogen (N) in the soil after potato and corn may result
in higher yields without the concomitant increase in total sugar production, which may or
may not be as critical in sugar extraction for ethanol as for refined sugar. However, it is not
clear that these Midwestern rotations are profit maximizing for all Pacific Northwest
conditions. For example, the large Benton County farm excludes potatoes from its onions‐
sugar beet‐2 yrs grass seed‐beans or sweet corn rotation (personal communication,
Waters, W.S.U. Extension, 2/19/09). The most popular potato rotation in eastern Idaho is
potatoes followed by two years of grains (Patterson, U.I. Extension, 2/23/09). Patterson
reports that southeastern and south‐central Idaho growers sometimes include both beets
and potatoes in four‐year rotations, but that southwestern farmers follow a beet‐small
grains‐corn‐dry beans rotation. Consequently, it seems that economically preferred
Table 5: Breakeven selling prices ($/ton) at given different yields
Yield (tons per acre)
36 40 44 49.55
(‐10% of base yield) (base yield) (+10% of base yield)
Breakeven price to 31.01 27.91 25.37 22.53
cover variable cost (VC)
Breakeven price to 52.30 47.07 42.79 38.00*
cover total cost (TC)
*Base price
15
rotations may depend on the agro‐climatic characteristics of different subregions as well as
relative prices of different rotational crops.
What conclusions can we deduce from the previous analysis? First, rotational benefits
from onions or other crops will have to be very high in order to offset the negative net
returns over total costs in Table 4. A second problem is that onions and other rotational
crops are sensitive to price decreases as their acreage increases. Third, the net returns and
breakeven results in Table 4 and 5 exclude transportation costs to a processor. The low
and negative net returns for “typical” conditions would be much worse if a grower had to
shoulder transportation costs of up to $37/ton to an Idaho plant. Transportation rates of
even half this size would be financially fatal. If growers tried growing sugar beets further
north in Franklin, Adams, Grant and other counties, the transport cost would increase
further. Fourth, the reliance on the large Benton County operation as a case study is more
likely than not to provide an overly optimistic representation of what would be typical
yields and technology for a more extensive industry. These conclusions reinforce the
previous discussion that sugar beets have many economic constraints to overcome in order
to return to Washington in significant volumes.
Relative profitability of sugar beets and Washington’s other irrigated crops
The net returns and breakeven results presented in Tables 4 and 5 provide useful
information from a single‐crop perspective. However, farmers make decisions on cropping
patterns based on the relative profitability of candidate crops or rotations. As an example,
a rotation of sugar beets‐onions‐wheat could have a positive net return over total costs of
$20 per rotational acre, and potatoes‐corn‐beans could have a net return of $40/rotational
acre. 10 The net return of $20 does not imply the farmer should grow the beets‐onion‐
wheat rotation simply because it is positive. Based on relative net returns, potatoes‐corn‐
beans make the farmer more money. This section reports recent results on projected
profitable irrigated crops in Washington’s irrigated cropland based on relative prices
(Yoder et al. 2008).
Linear programming (LP) models were used to project profitable crop acreages for
several crops and breakeven prices for sugar beets. 11 LP models calculate farmers’ profit
maximizing land use, input use, and technology selection subject to the quantity and quality
of their land and other resources, agro‐climatic conditions, agronomic constraints, and
10 Net return per rotational acre in a 3‐crop rotation is the sum of net return for one third acre of each of
the three crops.
11 See the appendix of Yoder et al. (2008) for a description of how LP identifies profit maximizing crops
based on relative prices.
16
policy provisions. The LP analysis included 17 candidate irrigated crops: alfalfa hay,
asparagus, barley, canola, dry edible beans, grain corn, green peas, hops, mint, onions,
orchards and vineyards, potatoes, spring wheat, sugar beets, sweet corn, winter wheat, and
others. Crop acreage in Washington’s irrigated region is typically dictated by processing
plant contracts, by relative profitability, and by agronomic rotation considerations.
Historical acreage bounds of crops were enforced in the analysis.
Intermediate run projections required estimating crop prices and production costs for
2009‐2011 (2010 midpoint). Historically, agricultural commodity price booms such as that
in 2008 have been followed by a return to long run real prices, or sometimes depressed
prices, as a result of vigorous supply response. This analysis assumed that price patterns
would follow historic cyclical patterns, albeit with return to a higher plateau. Specifically, it
was assumed that all 2010 crop prices retreat to a simple 3‐year moving average of the
2006, 2007, and 2008 prices. We assumed that all production costs, except diesel and
nitrogen, would increase 7% by the 2010 medium run midpoint compared to 2008 levels,
and diesel and nitrogen will increase by 20.3% and 19.4%, respectively.
For the 2009‐2011 intermediate run, zero acres of sugar beets were projected to be
grown in Washington. In contrast, large acreages of alfalfa hay, grain corn, sweet corn,
potatoes, wheat, orchards and vineyards, and other typical crops, were projected at historic
levels. Sugar beets failed to compete profitably with other irrigated crops based on their
relative prices and production costs. While sugar beets were down to 1,600 acres in 2008,
it seems plausible that a small acreage will survive into 2010. This linear programming
analysis provides estimates of acreage based on average cost and return conditions. As
noted before, the niche situation in southern Benton County is notably more favorable than
average. Based on average conditions, the model projected a sugar beet breakeven price of
$47.14/ton. This substantially exceeded the projected price of $38.5/ton. 12
Linear programming is an inherently inappropriate tool for long run projections because
of the lack of general equilibrium adjustments in all prices. In place of integrated
quantitative modeling, long run Washington crop feedstock availability are discussed
below in qualitative terms based on past trends and possible future trade reform.
12 This breakeven price is very close to the $47/ton breakeven price from the enterprise budget section,
but this is coincidental. The LP analysis computes breakeven compared to the profitability of competing
crops, but the budgeting analysis computes breakeven based only on sugar beet revenues and prices. The
two “break even” concepts are conceptually different, with that based on comparative profitability with
competing crops being more relevant to farmers.
17
Washington farmers’ responses to market signals speak quite clearly about the state’s
relatively weak competitiveness in sugar beet production. In contrast to Idaho, Washington
has struggled to maintain profitable sugar beet processing facilities over the past three
decades. But more broadly, the Pacific Northwest sugar beet industry as a whole has been
downsizing as well. Idaho’s acreage declined by 22% in 2008 compared to 2007. In 2008
Idaho beet production stood at its lowest level since 1977 (Wilkins 2008). As noted earlier,
strict import quotas and tariffs protect the American sugar industry from lower‐cost
foreign producers. If these protectionist policies were eliminated in the future, the entire
U.S. sugar beet and sugar cane industries would further downsize or possibly disappear.
Sugar beets would have a lower (perhaps much lower) value for sugar production,
implying that beet value for ethanol would increase in a relative sense to their value for
sugar, and therefore might more likely be used for ethanol production. However, there is
certainly no guarantee that the value of sugar beets for ethanol production alone (given
alternative feedstocks) would support an economically viable sugar beet industry.
Economic potential for ethanol production from sugar beets
As a benchmark for discussion of Washington’s potential to produce fuel from in‐state
feedstocks, Table 6 displays potential gasoline and diesel contributions if all existing or
historical production (in the case of sugar beets) were converted to biofuel production
(Yoder et al. 2008). The magnitudes are not large. Peak 1970’s sugar beet production in
the state would satisfy only 2.64% of the Washington’s current gasoline consumption if all
beets were converted to ethanol. The analogous percentage for field corn is 2.39%. Of
course, as argued earlier, there is a good likelihood that sugar refiners could outbid ethanol
producers, even if market conditions favored a return of a beet industry in Washington.
Table 6: Adequacy of WA canola, sugar beet and corn production to meet specified
demands
Item Canola Sugar beets Corn
WA 2007 acres for canola and corn, but 1970‐78 9,375 76,911 120,000
average acres for beets
In‐state production as 0.06 2.64 2.39
% of WA diesel or gasoline consumption per year
Number of 40 MGY plants supplied by in‐state 0.015 1.78 1.62
production
Notes: WA sugar beet acreage is based on the1970‐1978 average when the state produced sugar beets extensively.
Estimated 2008 WA sugar beet yield of 74,600 lbs/ac assumes yield growth proportionate to Idaho. Biodiesel from
canola requires 18.3 lbs canola/gal biodiesel (Mattson et al., 2007). Estimated WA average yield of 1,180 lbs/ac is from
the 2002 Agricultural Census. Sugar beet ethanol from requires 80.6 lbs sugar beets/gal (Salassi, 2007). Ethanol from
field corn requires 0.36 bu corn/gal ethanol (Lyons, 2008). The WA 2007 average yield of 210 bu/ac is from USDA‐NASS
(2008). MGY is million gallons per year. WA consumes about 1 and 2.7 billion gal/yr of diesel and gasoline, respectively.
18
Similarly, livestock feeders might outbid ethanol producers for field corn for the quantities
likely to be produced in Washington. Less than two 40‐million‐gallon‐per‐year ethanol
plants could be supplied by either crop feedstock under these optimistic assumptions
about end uses. Table 6 also shows that current Washington canola production could
satisfy only 0.06% of the state’s diesel consumption.
But current feedstock production is not the entire story. As discussed above, local
processing capacity is crucial as a determinant of the scale of production. The next
question to examine is the potential economic viability and sustainability of sugar beet
ethanol processing facilities in the state of Washington. We begin with the progress of corn
ethanol production in the state, because corn ethanol is not only the overwhelmingly
dominant form of biofuel produced in the United States, but also has received the most
attention in the private sector for potential development in Washington State.
Ethanol plant projects in Washington
To our knowledge, there are no sugar beet ethanol plants currently being planned for
Washington State, but several corn ethanol facilities are in various stages of development,
and it is useful to examine the status of these. Table 7 provides a summary of plans for
ethanol production facilities in Washington during 2007 to mid‐2008 (Yoder et al. 2008). 13
In 2007, there were no operational ethanol plants in the state, but 14 were in some stage of
development between concept and construction. This number included potential plants on
both the west side and the east side of the Cascades. The larger number was on the
eastside, as was the larger potential ethanol production capacity. Of the 14, two were in
actual or impending construction, four were in the permitting stage, two in planning, two in
concept stage, three were not reported, and one was focusing on experimental cellulosic
ethanol production. If all plants were constructed as then contemplated, they would have
had a total production capacity of at least 650 million gallons per year (MGY).
By mid‐2008, business plans had changed markedly. Startup had been delayed on both
plants under construction, three of those in permitting phase were put on hold and one was
cancelled, both in planning phase were cancelled, both in concept phase and the one
considering cellulosic ethanol production were not reported. Of the three not reported in
2007, one each is now in concept phase, planning phase, and feasibility study phase. Total
production capacity of those not cancelled or placed on hold would be about half the 2007
potential.
13 This section was taken largely from (Yoder et al. 2008).
19
Table 7: Change in status of WA ethanol plants from 2007 to 2008 (Source: Yoder et al.
2008 as derived from Lyons. Biofuel Development in Washington, WSU Extension Energy
Program, 2007 and 2008).
20
The west coast corn ethanol industry continued to decline into 2009. Pacific Ethanol
announced closing its 60 million gallon per year plants at Burley, ID and Stockton, CA, in
February 2009. The firm was also attempting to extend agreements with lenders to
forestall foreclosure or other “remedies.” 14 In light of these developments, it is fair to say
that the last two years has resulted in slower development of in‐state biofuel production
than many expected. It is beyond the scope of this project to perform a detailed analysis of
these outcomes, but a summary analysis of the prevailing market conditions for current
markets is useful. We can categorize these conditions into two parts: national biofuel
market conditions, and the relationship of Washington to these national markets.
National and even international biofuel markets have had a tumultuous couple of years.
Corn and other biofuel input prices have been volatile. Higher fossil fuel prices have cut
both ways for renewable fuel producers: they make renewable fuels more competitive, but
they also increase the costs of renewable fuel production by increasing the costs of
producing and transporting feedstocks and producing fuel itself. Sharp decreases in
petroleum and gasoline prices in later 2008 undercut demand for biofuels.
Although relatively few ethanol and biodiesel plants have stopped operations in the U.S.,
some firms are going into bankruptcy, and industry development has slowed substantially
not only in Washington State, but nationally and even internationally (Galbraith, 2008).
Credit markets have been increasingly tight during the financial crisis and recession
beginning in late 2007, and this is also likely to have had a substantial effect on not only
existing firms and plant operations, but the development of new plants (Reidy 2008).
Moreover, the biofuel industry in Washington State has not been able to successfully
compete on a large scale with the Midwest region in general, indicating that its production
costs are generally higher than those of the Midwest (again, under current market and
energy policy conditions). The extent to which current development projects have slowed
in the state is consistent with the larger industry trends, but is further indication that the
state’s position in current biofuel markets continues to be relatively weak.
There are several important comparisons and implications to be drawn from the above
analysis. First, as is the case with corn production, Washington State has shown itself
historically (through two failed sugar processing plants and a tumultuous sugar beet
production history) to be an economically marginal producer of sugar beets for sugar
production relative to other regions in the country. Second, virtually all ethanol in the U.S.
is based on corn as a feedstock. No ethanol is produced in the U.S. from sugar beets. This
strongly suggests a historical cost advantage of corn as an ethanol feedstock in the U.S, and
14 http://www.biofuelsbusiness.com/feature_stories_print.asp?ArticleID=100415.
21
a stronger derived demand for sugar beets for sugar production over ethanol production
nationwide. This will be discussed in more detail below. The combination of the relative
geographic cost disadvantages of sugar beet production in Washington, the relative
weakness of demand for sugar beets as an ethanol feedstock, and the relative weakness of
ethanol production for even the most competitive of ethanol production processes (corn
ethanol) suggest that regional and national markets have not, and likely will not (within
reasonably foreseeable market conditions) be conducive for sugar beet to ethanol
production in Washington State.
The economic costs of producing sugar beet ethanol
The above analysis is based on a broad interpretation of market conditions. Below we
examine existing national scale information on sugar beet to ethanol production costs, and
develop a more detailed cost analysis of sugar beet ethanol production to complement the
market analysis above.
A study by USDA (2006) estimated the costs of producing ethanol from various
feedstocks, including sugar cane and sugar beets. USDA (2006) assumed that these sugar
crops are converted to juice in order to produce ethanol using a method similar to that
used for making refined sugar, except for the process of converting juice into ethanol.
Table 8 provides the cost estimates of ethanol production using different feedstocks,
including corn. Comparable estimates for Brazil and European Union are also given (Berg
2004; IEA 2004).
Table 8: Comparison of estimated ethanol production costs for various feedstocks
($/gal.)1. Source: adapted from table 25 and 18, USDA (2006).
U.S.
Corn U.S. U.S. U.S. U.S. U.S. Brazil E.U.
wet Sugar Sugar Molass Raw Refined Sugar Sugar
Cost Item milling cane beets es3 sugar3 sugar3 Cane4 Beets4
Feedstock
costs2 0.82 1.48 1.58 0.91 3.12 3.61 0.30 0.97
Processing
costs 0.21 0.92 0.77 0.36 0.36 0.36 0.51 1.92
Total cost 1.03 2.40 2.35 1.27 3.48 3.97 0.81 2.89
1Excludes capital costs.
2Feedstock costs are gross costs. Unlike Table 25 in USDA (2006), corn ethanol byproduct credits are not
subtracted from corn feedstock, they are subtracted from processing costs for corn sugar cane, sugar beet
processing. Average values for 2003, 2004, and 2005 were used to calculate the corn numbers.
3Excludes transportation costs.
4Average of published estimates.
22
Processing costs include transportation, labor, fuel, chemicals, electricity, materials and
supplies, repairs and maintenance, and management. Contemporary feedstock costs were
estimated in USDA (2006) based on the market prices of feedstocks and co‐products, and
estimated ethanol conversion factors per unit of feedstock. In the U.S., the feedstock cost is
generally the largest ethanol cost component. It is especially high for sugar feedstocks.
Their estimate of $1.58 feedstock costs per gallon of ethanol represents the highest
feedstock costs of all sources. Total estimated costs of production for beet ethanol are
$2.35 per gallon. This cost is surpassed in the U.S. only by ethanol made with U.S. sugar
cane. Corn‐based ethanol has the least cost at $1.03 (wet milling) to $1.05 (dry milling, not
shown in Table 8) per gallon. 15
USDA (2006) treated the value of byproducts as a feedstock credit for corn, but as a
processing credit for sugar beets and sugar cane. In order to make their accounting for
corn consistent with their accounting for sugar beet and sugar cane ethanol, and also to be
consistent with our own accounting in the analysis below, we modified their accounting for
corn in Table 25. For corn, we added the byproduct credit back into the feedstock costs
estimate, and subtracted it from their processing cost estimates. 16 Table 8 shows that sugar
beet feedstock costs were nearly double that for corn, and after subtracting the byproduct
value, net processing costs for corn are estimated at $0.21 per gallon compared to $0.77 for
sugar beets. From USDA (2006), the estimated value of byproducts from corn (wet milling)
is $0.427. For sugar beets, pulp and other minor credits are estimated at $0.30/gallon.
The implication is that the price of ethanol should be equal to $2.35 to at least break
even, or greater than $2.35 to ensure the profitability of ethanol production using this
feedstock in the longer term. Therefore, the USDA (2006) study concludes that ethanol
production from sugar beets (and other sugar feedstocks) may be profitable given high
sustained ethanol prices. Current and most historical ethanol prices, however, tend to be
lower than that. Ethanol prices hit a peak of about $2.90 in June 2008 (it had hit higher
peaks previously), but have declined substantially. The March 2009 contract futures prices
hovered between $1.70 and $1.55 in January and February 2009 (DTN Ethanol Center
2009).
15 This estimate corn ethanol cost estimate is corroborated by Kwiatkowski (2006) who estimate corn
ethanol production costs at $1.04 per gallon, after byproduct credits are accounted for.
16 The numbers to make this calculation are available in USDA (2006) table 18. The average of 2003,
2004, and 2005 numbers were used.
23
These declines in the price of ethanol cast doubt on the profitability and sustainability of
producing ethanol from sugar beets (or other sugar feedstocks). 17 Given these relative
production costs and the tight market relationships between oil, ethanol and ethanol
feedstock prices, market conditions sufficient to support sugar beet production for ethanol
would almost certainly require a coincidence of high ethanol prices, high corn prices, high
oil prices, and low sugar prices. On this last point, sugar producers often question the
economic prospects of sugar‐to‐ethanol production (Jacobs 2006). This is because current
domestic sugar prices (supported by U.S. sugar policy) make it more profitable to convert
sugar beets (and sugar cane) into sugar than into ethanol. Sugar beet processing yields
refined beet sugar that is ready for use as a food product or ingredient.
Sugar beet processing for ethanol
Ethanol is currently produced from biomass that contains sugars and starch that are
fermented easily. In the process described first, sugar beets are converted to ethanol via a
typical production scheme described in Henke et al. (2006). It starts from extraction of raw
juice from sliced sugar beets. Raw juice can be used both for sugar production by cooling
crystallization, and for fermentation to produce ethanol. For sugar production, raw juice
must be purified by two‐step filtration involving pulp separation and microfiltration to
remove bigger particles, high molecule colorants, proteins and microorganisms. 18 For
ethanol fermentation, raw juice can be utilized directly. The main products of this process
are sugar and ethanol, and an important economic aspect of this technique is flexibility in
the production ratio of final products. This ratio for sugar and ethanol can be changed by
altering allocation of raw juice, and a producer can choose an optimal ratio between sugar
and ethanol production according to market prices and other factors.
Rather than focus on an already established process for which production information is
available (e.g. USDA 2006 and Henke et al. 2006), we examine a future prospect for a sugar
beet ethanol production process that integrates part of the standard process with new
approaches that focusing virtually entirely on ethanol as an output rather than co‐
17 It is worth noting that in 1980, production of ethanol from potatoes, sugar beets, and wheat using
geothermal resources in the Raft River area of Idaho was evaluated by Stenzel et al. (1980). The results of
this evaluation study suggest that a commercial‐scale geothermal alcohol facility in the Raft River KGRA is
technically feasible and could be economically attractive under certain conditions. However, market
conditions have changed substantially.
18 Another possible purifying step, which is not depicted in the scheme, is nanofiltration of permeate
obtained by microfiltration. In this step, water content in raw juice is reduced and non sugars like inorganic
ions should be removed as well. Permeate from nanofiltration contains mostly water and ions, thus it can be
used for concentrate dilution.
24
Figure 6: Sugar beet ethanol production flowchart. Stenzel et al. (1980) describes the
method for processing ethanol from raw juice and dry pulp from wet pulp. The
hydrolysis of wet pulp for ethanol is based on Aden et al. (2002).
production of sugar and ethanol. This approach utilizes the sugar beet pulp in a hydrolysis
process to produce ethanol, rather than selling the pulp for livestock feed or other uses.
This bioconversion technology chosen for an economical assessment in this project is
shown in Figure 6. Sugar beets are transported from farms to the facilities and are stored
for processing. Feedstocks pass through a preparation section for washing and removal of
stones, trash, weeds or leaves. Sugar beets are then sliced and discharged into a diffuser
and pulp press for beet juice extraction. Upon leaving the extraction section, the raw juice
moves through the various stages of fermentation and separation into the main product
ethanol. Various options for this technology exist at this stage of beet pulp utilization. The
traditional approach is to de‐water the wet pulp by heating and then pelletizing (Stenzel et
al. 1980). The dry pulp can then be used as animal feed or as an energy source.
An alternative approach, yet to be implemented commercially, is to apply hydrolysis to
the wet pulp to make sugar for use as a feedstock for more ethanol, and then use the
remaining material for energy, feed, or feedstock for cellulosic ethanol production (Aden et
al. 2002).
25
Enterprise budget for sugar beet ethanol
Below we estimate the production cost budget of sugar beet ethanol based on the
processes summarized above. The main processing flowchart and system parameters are
found in Stenzel et al. (1980). For the wet pulp hydrolysis process, technology and
equipment cost information were drawn from Aden et al. (2002), and Philips et al. (2007).
For the wet‐to‐dry pulp processing option, processing cost data are based on Thompson et
al. (2005). 19
Enterprise budget costs are broken down into two components: initial processing
facility investment that forms the foundation for fixed costs, and variable costs per unit of
ethanol output. For this enterprise budget, we assume an ethanol production facility with a
base capacity of 20 million gallons per year (MGY). We assume a sugar beet conversion
rate of 24 Gallons of ethanol per ton of sugar beets (FAPRI 2006), indicating the need for
833,333 tons of sugar beets per year. 20 At a cost of $38/ton, this implies feedstock costs
per year of $31,666,667. Total Project Investment (TPI) is summarized in Table 9.
Equipment cost data and salary information was acquired from Stenzel et al. (1980) and
Philips et al. (2007).
Table 9: Total Project Investment (TPI) estimation
19 Details are available in spreadsheet form from the project leader.
20 At the yield per acre of sugar beets listed in Table 2, this would require 21,368 harvested acres of
Washington sugar beets, which is substantially less than the peak acreages of 60‐90 thousand acres in the late
1970s, but is substantially more than the 1,600 acres in sugar beets today.
26
Table 10: Production cost estimates for beet pulp as ethanol feedstock option. Dollars
per gallon of ethanol produced.
Item Cost/gallon
Variable Operating Cost
Beet acquisition5 $0.15
Fuel1 $0.11
Chemicals1,2 $0.16
Electricity1 $0.05
Materials and supplies1 $0.08
Fixed Operating Cost
Total Salaries $1,820,000 $0.08
General Overhead $1,092,000 60% of Total Salaries $0.05
Maintenance $1,271,600 2% of Total Install Equipment Cost $0.05
Insurance & Taxes $1,009,113 1.5% of Total Install Cost $0.04
Processing Cost $0.77
Feedstock Cost $1.35
Ethanol Production cost $2.12
1 Stenzel, R., J. Yu, et al (1980). Ethanol production for automotive fuel Usage
2 Aden, A., M. Ruth, et al. (2002). Lignocellulosic Biomass to Ethanol Process Design and Economics
Utilizing Co‐Current Dilute Acid Prehydrolysis and Enzymatic Hydrolysis for Corn Stover, National
Renewable Energy Laboratory Harris Group.
3 Phillips, S., A. Aden, et al. (2007). Thermochemical Ethanol via Indirect Gasification and Mixed Alcohol
Synthesis of Lignocellulosic Biomass, National Renewable Energy Laboratory
4 Robin Thompson, Sarah Campbell, Sugar Beet‐‐ Preliminary feasibility of ethanol production from sugar
beet in NE Tasmania.
5 U.S. Department of Agriculture (USDA). 2006. The Economic Feasibility of Ethanol Production from
Sugar in the United States.
http://www.usda.gov/oce/reports/energy/EthanolSugarFeasibilityReport3.pdf.July.
A summary of the variable and fixed costs of production of sugar beet ethanol is given in
Table 10 for the option to apply hydrolysis to the wet pulp to produce more ethanol, rather
than producing dry pulp. Because the wet beet pulp after pulp pressing contains 25%
solids, we assumed this mass stream can be put into a hydrolysis reactor directly. The
conversion technology and process parameters for this approach are found in Aden et al.
(2002). The calculation methods used here are the same as those used in USDA (2006). For
both of the two options (wet to dry pulp, and hydrolysis of wet pulp for ethanol), feedstock
costs make up nearly 2/3 of total cost.
Table 11 provides a summary of production costs for both production options. In the
case of the dry beet pulp option, a credit of $0.30 per gallon of ethanol produced is added
for the sale of dry beet pulp. This credit is subtracted from the per gallon production
27
Table 11: Summary of sugar beet production cost estimation
Feedstock Processing
Yield Cost Cost Total Cost
(MGY) ($/Gallon) ($/Gallon) ($/Gallon)
Sugar beet ethanol ( dry beet pulp) 20.0 1.58 0.70 2.29
Sugar beet ethanol ( beet pulp to ethanol) 23.4 1.35 0.77 2.12
Sugar beet costs from Table 8 1.58 0.77 2.35
costs. 21 For the beet pulp hydrolysis to ethanol option, the process foregoes the dry pulp
credit, but produces an additional 3.4 million gallons of ethanol a year, so the average cost
per gallon declines.
The final cost estimates show a moderate reduction in total cost for the dry‐beet‐pulp
process relative to the USDA (2006) estimates. This is because we relied on a new data
source (cited in the enterprise budget and above) that allows us to generate comparable
numbers for the two processes considered here. Thus, based on our comparison of the two
methods, the per gallon costs of ethanol using the hydrolysis option reduces estimated
costs by $0.17 cents, to $2.12 per gallon. There is another advantage of using the beet pulp
for ethanol production that is not captured in this static snapshot of possible market
outcomes. Were a sugar beet ethanol industry developed alone with increased beet
production, the amount of beet pulp supplied would increase locally around this industry.
As is often the case, this is likely to result in a reduction in beet pulp prices as this co‐
product becomes locally more abundant. In contrast, if pulp were to be used via hydrolysis
for ethanol production, this problem of co‐product price decline would be reduced.
Nonetheless, even the reduced estimated cost due to the use of hydrolysis for converting
pulp to ethanol is more than double the corn ethanol cost estimate of $1.03 per gallon, and
would likely become competitive only as corn and oil prices increase (see Tyner and
Taheripour (2007) for related discussion), and sugar prices decrease.
Assessment of infrastructure needs
Sugar beets are commonly moved by truck from fields to a common “dump” for
temporary storage, prior to transportation to processing facilities, again, via trucks or rail
(when available for large quantities) along public transportation routes. These dumps are
21 Again, based on calculation using USDA (2006) data, byproduct credit values can range from $0.25 to
$0.35 per gallon. Estimates for Northwestern United States are on the lower end of this range. We use $0.30
for our calculations as an intermediate value.
28
often unenclosed, and require relatively little infrastructure development. Although
transportation costs are an important determinant of competitiveness for sugar beet
production given access only to distant processing facilities, transportation infrastructure
itself is unlikely to be a determining factor in further market development. It seems
apparent that the most important infrastructure needs to support a local sugar beet
ethanol industry is the existence of a local processing facility itself. The history of sugar
processing facilities and their failures, the correlation between these failures and sugar
beet production suggest this relationship. The recent setbacks in the developments in corn
ethanol production facilities in the state mirror, on an even larger scale, the apparent
economic marginality of sugar processing. Thus, a focus on improving infrastructure in the
form of storage or transportation facilities without first establishing viable processing
would appear premature.
Potential contribution to rural economic development
One of the clear findings of our analysis is that due to the nature of sugar beets as a
feedstock for ethanol in terms of their costs of transportation and storage, an increase in
the scale sugar beet production in the state and viable and sustainable production of
ethanol (or even sugar) depends critically on the development of proximate processing
infrastructure. Were such a marketing and production system to develop, it would likely
provide economic benefits to rural communities through both feedstock production and
processing industries.
However, existing markets for sugar beets, sugar, and ethanol, as well as our cost
analyses, provide evidence of the difficult economic realities to be overcome for the use of
sugar beets to produce ethanol in Washington State. Our analysis shows that the sugar
beets produced currently in Washington State appear to be produced at an economic loss
in themselves, but are still produced in small quantities primarily because of atypically
favorable transportation arrangements. This current market reality suggests that
Washington State has a comparative advantage at producing agricultural commodities
other than sugar beets, whereas other states are better suited for sugar beet production.
No ethanol is currently produced from sugar beets in the U.S. Instead, 97 percent of ethanol
produced in the U.S. is produced from corn. This suggests that corn is better suited for
ethanol production given current market conditions and policy in the U.S. Indeed, existing
studies show that for current technologies and markets, ethanol production from sugar
beets is more costly than from corn. Further, ethanol production in the United States has
increased substantially in the last five years, but to date, Washington State produces no
ethanol for fuel. This reality follows to a large degree from the fact that the current
primary feedstock ‐‐‐ corn ‐‐‐ is costly to produce here relative to the Midwest. As we have
seen from our enterprise budgets above, the costs of sugar beet production in Washington
29
are generally higher than elsewhere, and the costs of producing ethanol from sugar beets
are substantially higher than corn in typical circumstances.
These market realities suggest that the development of a sugar beet ethanol industry in
Washington State is unlikely to come to fruition under most foreseeable market conditions.
The potential for rural economic development through the growth of a sugar beet ethanol
industry appears substantially less likely than the development of other agricultural
industries. In particular, it seems clear that the development of a sugar beet ethanol
industry is less likely than a sustainable sugar refining industry, but recent history and our
enterprise budget results suggest that such a prospect is itself unlikely. Further, larger
markets as well as our enterprise budget results suggest that corn ethanol plants are likely
to be more competitive than sugar beet ethanol nationally, and even in Washington, than
sugar beet ethanol. But recent difficulties faced by corn ethanol projects in this state
highlight the difficult market realities in that sector as well.
Conclusion
This report provides an assessment of the potential for the development of an ethanol
industry in Washington State based on sugar beets as a feedstock. As a foundation for the
analysis, we summarize the recent economic history of all of the most important related
markets, including sugar beet production in Washington and the nation, ethanol
production from sugar beets and alternative feedstocks such as corn, and sugar markets.
To complement this historical market perspective, we develop two enterprise budgets: one
for sugar beet production in Washington, and one for a new, proposed ethanol production
process for using a sugar beet feedstock. We then provide an interpretation of the data and
results relative to infrastructure needs and the potential for economic development.
Our findings regarding the prospects for the development of a sugar beet ethanol
industry in the state are pessimistic under foreseeable economic and policy conditions in
the short and intermediate run. The reasons for this assessment are described in detail in
the previous sections. However, there are potential developments that could increase the
potential viability of the development of such an industry in Washington.
Market conditions that simultaneously increase the price of corn, increase the price of
petroleum, and decrease the price of refined sugar all could increase the economic
competitiveness of sugar beets as an ethanol source at the national level. Several factors
could contribute to these combined price effects: for example, (1) climatic change and
droughts that increase corn and other feed grain prices, (2) supply disruptions, and (3)
trade reform that allowed cheap foreign sugar into the U.S. However, these changes might
benefit larger beet producing states more than Washington unless supply and demand
conditions decreased relative prices of competing irrigated crops in Washington such as
30
sweet corn, vineyards and orchards, alfalfa hay, small grains, and potatoes. Furthermore,
such changes may not come in the “perfect harbor” for beets described in (1) through (3)
above. Only one or two of the exogenous changes may occur. Furthermore, future
technical progress, such as corn varieties that are more drought resistant, or other energy
options such as solar, wind, geothermal, and nuclear energy could substitute for the
shortfall in petroleum supplies subject to the constraints of substitutability among energy
types for various energy uses. Current technology, policy, and market developments do not
suggest that sugar beets are likely to be an economically viable or sustainable source of
ethanol in Washington State.
We summarize a production process for ethanol from sugar beets that may prove
economically more viable than the more common sugar beet ethanol processing
approaches. In particular, based on a new technological approach for utilizing beet pulp as
a feedstock for ethanol via hydrolysis, (in addition to the sucrose content of beets), we find
modest potential cost reductions for ethanol production over current methods. It is
possible that in the long run, the costs of sugar beet ethanol processing may decline due to
technological advances such as the new method examined here. However, relative to
advanced biofuels, for example, the process for sugar based ethanol production is relatively
well developed, and is relatively unlikely to see substantial cost improvements. Further,
other states which have a greater relative advantage in sugar beet production could also
exploit these innovations and increase production and decrease beet prices to the
disadvantage of a marginal producer like Washington.
Finally, if federal biofuel policy continues to push the development of biofuel markets
through Renewable Fuel Standards and tax credits, and/or if the state of Washington
develops policies that support sugar beet ethanol industries specifically, these
developments in conjunction with substantial changes toward favorable market conditions
could conceivably drive sugar beet demand for ethanol beyond its value for sugar.
However, we find that this outcome is unlikely in the foreseeable future in Washington.
31
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35
Appendix A. Relationship between transportation costs and breakeven
yields.
The break even yield is that which results in total revenues equaling total costs, which imply
the following:
(1) YP − TY − C = 0
where: Y = yield (tons/ac), P = price ($/ton), T = transportation cost ($/ton), C= (other)
production costs ($/ac).
For simplicity, assume C>0 is a constant and P and Y are independent. Further, given C>0, we
also require that P > T for profits to be non-negative. Then, solving for Y in (1) provides the
breakeven yield, YBE :
−1
(2) YBE = C ( P − T )
The relationship between the break even yield and transportation costs is the slope of (2):
∂YBE −2 C
(3) = ( −1) C ( P − T ) ( −1) = >0
∂T (P −T ) 2
So YBE rises as transportation cost rises. This is intuitively reasonable, because it requires a
higher yield to “bear” the higher transportation cost. Further, the break even yield increases at an
increasing rate as transportation costs increase:
∂ 2YBE −3 2C
(4) = ( −2 ) C ( P − T ) ( −1) = >0
∂ T
2
(P −T )3
From (2) YBE intercept is C / P , so the break even yield can be graphed as a function of
transportation approximately as in Figure A1.
Fig. A1. Relationship between transportation costs and breakeven yield
A limited empirical “test” of this relationship between yield and transportation costs is whether
or not recent yield of surviving beet acres in Washington has increased (with high transport cost
36
to Nampa, ID) relative to 1970’s with lower transport cost to Columbia Basin and larger
production? [Other variables, such as annual pests, regional droughts, etc., could cause annual
deviations from this accounting equation.]
Normalizing Washington yields in different periods by U.S. average yield:
YWA,03−06 39.0 YWA,'74 25.6
= = 1.66 > = = 1.41
YU .S .,03−06 23.5 YU .S .,'74 18.2
This indicates that normalized yield in Washington is higher during the recent period in which
transportation costs are higher.
Normalizing by Minnesota yields ---
YWA,03−06 39.0 YWA,'74 25.6
= = 1.80 > = = 1.38
YMN ,03−06 21.7 YMN ,'74 18.3
Normalizing by Minnesota yields indicates the same expected relationship as normalizing with
U.S. average yields. Based on this limited evidence we would indeed expect that yields would
decline with the expansion of the sugar beet industry.
37
Appendix B: Details of sugar beet enterprise budget
Table B‐1: Input Price Assumptions Used in the Sugar Beets Enterprise Budget
Input Price Unit
Sugar Beet Seed 1 211.00 acre
Roundup Power Max1 10.50 qt
Lorsban1 8.25 qt
Eptam 1 4.13 pt
Treflan1 2.13 pt
Poast1 9.13 pt
Asana1 0.51 oz
Nortron SC 2 12.31 pt
Upbeet2 47.30 oz
Betamix2 0.68 oz
Stinger2 3.62 oz
MSO 4 16.00 gal
Nitrogen 3 0.79 lb
UAN ‐ Liquid Nitrogen2 0.58 lb
Phosphorous3 1.24 lb
Potassium3 0.46 lb
Sulfur
3 0.38 lb
Aerial Herbicide 8.00 acre
Soil Sample 0.40 acre
Custom applicators:
RoGator 8.25 acre
TerraGator 8.25 acre
Cash Rent5 650.00 acre
Diesel 2.50 gal
Labor 20.00 acre
1 Locke, Wes. Agronomist. Sun Haven Farms, Prosser, WA.
2 University of Idaho. Idaho Crop Input Price Summary for 2007.
3 Koenig, Richard. Washington State University.
4 North Dakota State University Weed Management Guide, 2008.
5 Cash rent in the Columbia Basin is assumed at $650 per acre based on 2008 cash rent estimates
for this region.
38
Table B‐2: Production costs for sugar beets following onions, Columbia Basin, WA
($/acre).
Quantity Per Price or Value or
Item Unit
Acre Cost/Unit Cost/Acre
Gross Returns
Sugar Beets 40 tons $38.00 $1,520.00
Variable Costs
Seed: $211.00
Sugar Beet Seed, Roundup Ready 1 ac $211.00 $211.00
Fertilizer: $58.00
Nitrogen 0 lb $0.79 $0.00
UAN ‐ Liquid Nitrogen 100 lb $0.58 $58.00
Residual Nitrogen1 120 lb $0.00 $0.00
Phosphorous 0 lb $1.24 $0.00
Potassium 0 lb $0.46 $0.00
Sulfur 0 lb $0.38 $0.00
Pesticides: $42.94
Roundup Ready Max 2 qt $10.50 $21.00
Treflan 1.25 pt $2.13 $2.66
Eptam 3 pt $4.13 $12.38
Poast2 0.38 pt $9.13 $3.42
Asana3 1.45 oz $0.51 $0.74
Lorsban4 0.33 oz $8.25 $2.75
Irrigation: $238.23
Water Use 24.4 ac in $5.98 $145.91
Irrigation Maintenance (Pivot,
ac in
Pump) 24.4 $2.81 $68.56
Irrigation Labor 1 ac $17.50 $17.50
Irrigation Management5 1 ac $6.25 $6.25
Custom & Consultants: $10.65
Aerial Herbicide6 0.25 acre $8.00 $2.00
TerraGator 1 acre $8.25 $8.25
Soil Sample 1 acre $0.40 $0.40
Other: $253.13
Crop insurance 1 acre $5.84 $5.84
Sugar beet cooperative member fee 40.00 ton $0.0024 $0.10
39
Table B‐2: Cont’d. Production costs for sugar beets following onions, Columbia Basin, WA
($/acre).
Sugar beet research fund7 40.00 ton $0.22 $8.72
Fuel 18.21 gal $2.50 $72.90
Lubricants 1 acre $11.23 $10.88
Other (continued):
Machinery Repairs 1 acre $34.32 $36.24
Storage Facility & Equip. Repairs $0.00
Machinery Labor 4.32 acre $20.00 $108.46
Other Labor $0.00
Management Fee 1 acre $10.00 $10.00
Overhead $28.25
Operating Interest $25.43
Total Variable Costs $1,116.50
Variable Costs per Unit $27.91
Net Returns Above Variable Costs $403.50
Fixed Costs:
Machinery depreciation $60.88
Machinery interest $39.37
Machinery insurance, taxes housing, license $16.02
Land Cost8 1 acre $650.00 $650.00
Total Fixed Costs $766.26
Fixed Costs per Unit $19.16
Total Costs per Acre $1,882.76
Total Cost per Unit $46.47
Returns to Risk $362.76
1 Residual nitrogen from onion production will be approximately 120 lb per acre (based upon soil testing).
2 Poast is typically needed 1 year in 4. This 0.38 pt/year represents an annual average.
3 Asana is typically needed 1 year in 4. This 1.45 oz/year represents an annual average.
4 Lorsan is typically needed 1 year in 3. This 0.33 oz/year rate represents an annual average.
5 Based on a management fee of $12,500 for 2000 acres
6 Aerial herbicide spraying is typically needed 1 year in 4. This 0.25 rate represents an annual average.
7 Contribution goes to the Amalgamated Sugar Company, a grower‐owned cooperative.
8 Land costs include irrigation system ownership costs.
40
Table B‐3: Machinery cost by machine and by operation for producing irrigated sugar beets following onions, Columbia
Basin, WA ($/acre)
Ownership Costs ($/acre) Operating Costs ($/acre) Labor Labor Fuel/Acre Total Cost
Operation Deprec Interest Taxes, Total Repairs Fuel Lube Total ($/acre) (hr/acre) (gal/acre) ($/acre)
iation Housing, Fixed Variable
Insur., Costs Costs
Licenses
18' Ripper 4.59 1.19 0.36 6.14 0.80 3.95 0.59 5.34 3.04 0.15 1.58 14.52
8‐Bottom Plow 7.22 2.50 0.73 10.45 0.72 5.74 0.86 7.32 4.39 0.22 2.30 22.16
18' Ripper* 2.30 0.60 0.18 3.07 0.40 1.98 0.30 2.67 1.52 0.08 0.79 7.26
25'‐Ground Hog 2.12 0.64 0.19 2.95 0.19 2.07 0.31 2.57 1.41 0.07 0.83 6.93
22' Bedder 2.86 2.35 0.68 5.89 0.72 3.91 0.59 5.22 3.13 0.16 1.56 14.24
22' Planter 6.39 4.13 1.16 11.68 3.38 4.53 0.68 8.59 3.96 0.20 1.81 24.23
66' Sprayer 0.22 0.25 0.12 0.59 0.06 0.30 0.04 0.40 0.86 0.04 0.12 1.85
Nurse Truck 0.50 0.38 0.45 1.33 1.00 0.42 0.06 1.48 1.20 0.06 0.17 4.01
66' Sprayer 0.22 0.25 0.12 0.59 0.06 0.30 0.04 0.40 0.86 0.04 0.12 1.85
Nurse Truck 0.50 0.38 0.45 1.33 1.00 0.42 0.06 1.48 1.20 0.06 0.17 4.01
22' Cultivator 2.81 2.54 0.56 5.91 0.75 4.53 0.68 5.96 3.96 0.20 1.81 15.83
66' Sprayer 0.22 0.25 0.12 0.59 0.06 0.30 0.04 0.40 0.86 0.04 0.12 1.85
Nurse Truck 0.50 0.38 0.45 1.33 1.00 0.42 0.06 1.48 1.20 0.06 0.17 4.01
22' Cultivator 2.81 2.54 0.56 5.91 0.75 4.53 0.68 5.96 3.96 0.20 1.81 15.83
66' Sprayer 0.22 0.25 0.12 0.59 0.06 0.30 0.04 0.40 0.86 0.04 0.12 1.85
Nurse Truck 0.50 0.38 0.45 1.33 1.00 0.42 0.06 1.48 1.20 0.06 0.17 4.01
22' Dammer Diker 6.78 3.81 0.51 11.10 0.57 3.44 0.52 4.53 2.64 0.13 1.38 18.27
66' Sprayer 0.22 0.25 0.12 0.59 0.06 0.30 0.04 0.40 0.86 0.04 0.12 1.85
Nurse Truck 0.50 0.38 0.45 1.33 1.00 0.42 0.06 1.48 1.20 0.06 0.17 4.01
22' Topper 6.13 3.94 1.04 11.11 5.21 5.26 0.79 11.26 4.04 0.20 2.10 26.41
6‐Row Digger 9.32 8.21 2.32 19.85 12.06 9.42 1.41 22.89 7.24 0.36 3.77 49.98
Manager's Pickup 0.62 0.19 0.17 0.98 0.28 0.28 0.04 0.60 1.23 0.06 0.11 2.81
Labor's Pickup 0.38 0.18 0.16 0.72 0.31 0.51 0.08 0.90 2.44 0.12 0.20 4.06
41
Table B‐3, cont’d: Machinery cost by machine and by operation for producing irrigated sugar beets following onions,
Columbia Basin, WA ($/acre)
Tandem Axle (10‐ 0.59 0.68 0.91 2.18 0.96 3.83 0.57 5.36 11.04 0.55 1.53 18.58
wheel) Truck #1
Tandem Axle (10‐ 0.59 0.68 0.91 2.18 0.96 3.83 0.57 5.36 11.04 0.55 1.53 18.58
wheel) Truck #2
Tandem Axle (10‐ 0.59 0.68 0.91 2.18 0.96 3.83 0.57 5.36 11.04 0.55 1.53 18.58
wheel) Truck #3
Tandem Axle (10‐ 0.59 0.68 0.91 2.18 0.96 3.83 0.57 5.36 11.04 0.55 1.53 18.58
wheel) Truck #4
Tandem Axle (10‐ 0.59 0.68 0.91 2.18 0.96 3.83 0.57 5.36 11.04 0.55 1.53 18.58
wheel) Truck #5
Total Cost $/Acre 60.88 39.37 16.02 116.3 36.24 72.90 10.88 120.01 108.46 5.42 29.16 344.73
42
Table B‐4: Machinery complement for sugar beets following onions, Columbia Basin, Washington.
Type of Machine Replace‐ Age When Years Annual Salvage Value Annual Gallons Taxes, Labor Acres
ment Purchased of Usage ($) Repairs of Fuel Housing, Multiplier per
Value ($) Life (Materials per Insurance, Hour
& Labor, $) Hour Licenses*
(%)
Tractors, ATVs:
180HP‐WT, 4WD 130,000 0 8 750 65,000 2,500 11.0 2.3 1.1
200HP‐WT, 4WD 135,000 0 8 750 60,000 2,500 11.0 2.3 1.1
250HP‐WT, 4WD 178,000 0 3 1200 65,000 2,300 11.5 2.3 1.1
Equipment:
18' Ripper 18,000 0 15 640 ‐ 2,500 2.0 1.1 7.25
8‐Bottom Plow 16,500 0 12 175 6,500 300 2.0 1.1 5.00
25' Ground Hog 30,000 0 10 625 12,000 700 2.0 1.1 15.50
22' Bedder 50,000 0 20 280 2,500 500 2.0 1.1 7.00
22' Planter 48,000 0 10 140 10,000 2,400 2.0 1.2 6.00
22' Cultivator 22,000 0 20 166 4,000 200 0.6 1.1 6.07
22' Dammer Diker 40,000 0 20 70 5,000 200 0.6 1.1 8.32
22' Topper/Stalk 50,000 0 15 160 ‐ 4,000 1.7 1.1 5.44
h
6‐Row Harvester 65,000 0 20 180 8,000 6,000 2.0 1.1 3.00
66' Self‐Propelled 90,000 0 15 650 30,000 1,000 3.33 3.5 1.2
Trucks: Miles/year: MPG:
Tandem Axle Truck #1 35,000 5 15 24,000 12,000 2,500 6.0 10.1 1.2
Tandem Axle Truck #2 35,000 5 15 24,000 12,000 2,500 6.0 10.1 1.2
Tandem Axle Truck #3 35,000 5 15 24,000 12,000 2,500 6.0 10.1 1.2
Tandem Axle Truck #4 35,000 5 15 24,000 12,000 2,500 6.0 10.1 1.2
Tandem Axle Truck #5 35,000 5 15 24,000 12,000 2,500 6.0 10.1 1.2
Manager's Pickup 37,000 0 3 18,000 17,000 3,000 12.0 6.8 1.1
Laborer's Pickup 21,000 3 10 15,000 2,500 1,500 12.0 6.8 1.2
*These are calculated as a percentage of the annual investment.
43