The combined effect of many farmers’ decisions about which crop to plant and how to produce it is a supply function for each crop. The supply function is defined as the schedule of the quantities of a commodity that will be produced at various prices for that commodity; all else held constant. Typically, as prices rise, producers are willing to produce more of that commodity. Increased production may be achieved by increasing the amount of various inputs and possibly reducing the production of other commodities. The supply function can be shifted up or down by factors other than the price of the product. For example, increases in the price of a competing product may cause farmers to reduce production of one crop to increase production of the competing crop. The supply function of the original crop would shift up and to the left such that a higher price would be required to maintain the same level of production. Changed prices of inputs are another factor that can shift supply functions. Lower input prices mean farmers are willing to use more inputs and supply more of the crop at the same product price. In other words, the supply function shifts down and to the right with lower input prices. Technological improvement has been a major shifter of supply of agricultural commodities over the past several decades. Technological improvement is characterized by yield increases with declining levels of input use and hence lower cost per unit yield. Technological improvement of cellulosic crops can thus be a major driver of sector growth.

Supply of cellulosic crops may take many forms and may be location specific. Where the cellulosic crop is a lower valued co-product (e. g., corn stover), the supply may be driven largely by the supply of corn and the marginal costs of harvesting and delivering stover and the cost of replacing any soil nutrients exported with the stover. Where the cellulosic crop is a stand-alone crop, such as any of the perennial grasses, in a cash market setting the supply may conform to the classical description above with quantity being driven by price and relative profitability versus other crops. Where the supply is restricted by contracts to a fixed acreage, then price may have limited effect on quantity supplied except to the extent that variable inputs are used or not used to enhance yield. A thorough overview of bioproduct feedstock supply in the United States is provided in the Billion Ton Study Update [5]. A demand function for cellulosic crops may be defined as a schedule of the quantities of cellu­losic feedstock that will be demanded at various prices, all else held constant. As prices rise, the quantity demanded would fall as purchasers find substitute feedstocks or simply reduce the quantity consumed. Shifters of demand for a specific cellulosic feedstock may include the price of a competing feedstock. As the price of a competing feedstock falls, buyers shift to the competing feedstock and demand less of the current feedstock. The demand curve shifts down and to the left as a lower quantity is demanded at the same price. Similarly, an increase in the price of the end product (e. g., fuel) may shift the demand function upward and to the right as buyers are willing to bid more for the same quantity of feedstock.

Longer term, demand for commodities may be expected to increase as the global pop­ulation becomes larger (e. g., from 7 billion to 9.1 billion by 2050) and particularly as income rises (by 135% by 2050). Population and income are important demand shifters for many goods and services. Furthermore, declining stocks of non-renewable inputs such as petroleum and phosphorus may result in reduced supply and higher relative prices for such commodities. Reduced supply may increase the demand for substitutes and increase incentives for technological change that reduces use of those commodities.

15.5.1 Derived Demand

Intermediate products such as cellulosic feedstocks face a derived demand function. That is, the demand function they face is derived from the retail market for the end products and translated through the profit functions of each handler and processor involved in transforming the feedstock at the farm to the products at the consumer outlets (biofuel, other biochemicals, etc.). In addition to the retail prices for end products, derived demand functions are shifted by prices and quantities of inputs used from farm to retail. Capital, labor, and energy are important inputs in converting cellulosic biomass to end products. Because of their bulkiness, the costs of transporting and storing cellulosic feedstocks are important shifters of the derived demand function at a specific farm. That is, the farm price at which a specific quantity is demanded may fall with distance from the initial processing location. Some processing operations offering contracts with transport included may restrict contract offers to farms within a specified radius around the processing location (e. g., 30 or 50 miles).

Again, technological change can result in an upward shift in derived demand. More effi­cient conversion of feedstock to end products allows processors to bid more for feedstock. Historically, the farm to retail margin for bioenergy products has been less variable than the retail price of biofuels and other fuel. In other words, most of the volatility in farm prices for biofuels feedstock crops can be traced to volatility in retail fuel prices.

A fundamental advantage for integration of cellulosic ethanol into current first generation ethanol production from sugarcane in Brazil is the availability of lignocellulosic material (bagasse) at the plant site and the feasible alternative to also use sugarcane crop residues (straw). Regarding this, it is fundamental to consider optimization strategies for first gener­ation ethanol production, aiming at energy savings and, thus, more surplus lignocellulosic material for second generation ethanol production. Cellulosic ethanol production in Brazil may also benefit from sharing part of the infrastructure where first generation ethanol pro­duction takes place (for instance juice concentration, fermentation, distillation, storage and cogeneration facilities). In addition, potential fermentation inhibitors generated in the lig — nocellulosic material pretreatment may have a minor effect on fermentation yields, since the hydrolyzed liquor may be fermented mixed with sugarcane juice, diluting these inhibitors.

Due to the high potential of biomass for the production of fuels and chemicals, research in Brazil has focused on the hydrolysis of sugarcane bagasse and/or straw for cellulosic ethanol production. Furthermore, the production of liquid fuels through the use of pyrolysis/ gasification has also been seen as a promising alternative.

Second generation ethanol production involves basically four steps: pretreatment, enzy­matic hydrolysis, fermentation and ethanol recovery. In recent years, pilot and demonstrat — tion scale plants have been built in Brazil and worldwide. However, enzymatic technology still faces numerous obstacles and is not yet mature enough for full commercialization. Some major challenges faced are the high cost of the pretreatment step and the low effi­ciency of the enzymatic saccharification of polysaccharides to sugars, as well as the high cost of enzymes.

Owing to the large impact of the pretreatment step on all the other operations in the process, research efforts have been made to find efficient, fast and affordable pretreatment methods which primarily aim at making biomass accessible to enzymatic attack. Several pretreatment methods have been studied in Brazil, usually involving high temperature and pressure, such as in hydrothermal and steam explosion pretreatments. These processes may be performed at different pH (acidic, basic or neutral), depending on the addition or absence of catalysts; also, the use of organic solvents in these processes is quite usual. Common to all of them is the need to integrate the process, including energy and water consumption and reagent recovery, in order to obtain high cellulosic ethanol yields at reasonable costs and low environmental impacts.

These pretreatment methods need to be further improved in combination with enzy­matic hydrolysis and fermentation, as improved enzyme mixtures may lead to less severe pretreatment conditions and, thereby, to lower enzyme costs and reduced formation of inhibitory compounds, while more robust fermentation organisms can tolerate more toxic hydrolysates.

Regarding enzymatic hydrolysis, studies have shown that reducing the cost of cellulase enzyme production is an essential step to make enzymatic hydrolysis more economically feasible. In-house enzyme production, using part of the pretreated bagasse as substrate, emerges as a potentially attractive alternative technology. Another important factor to be considered is the increase of enzyme effectiveness that can be achieved through the development of more efficient enzymes and enzymatic complexes with higher activity.

The inclusion of a hauling contractor in the business plan provides the best opportunity for all of the technology developed for other logistics systems to be applied to feedstock logistics. The “information technologies” applied include a Global Positioning System (GPS) unit in every truck, a bar code on every multibale handling unit, data entry over the cell phone network at every SSL load-out site, data entry (load mass and time stamp) for each load across the receiving facility scales, and a data entry when each multibale handling unit is unloaded in the plant. The data collected is used to optimize asset utilization in real time; it will also feed needed data into the bookkeeping software to pay the farmgate and hauling contracts.

It is expected that the collected data will be presented, in real time, to a “Feedstock Manager”, perhaps as a map display showing the location of all assets updated at a pro­grammed time interval. The goal is to provide an opportunity for the Feedstock Manager to make optimization decisions in real time. Examples are: trucks rerouted to avoid traffic delays, assets redeployed during breakdowns, at-plant inventory increased when inclement weather is forecast, and a turn-down of plant consumption when a delay in feedstock deliveries cannot be avoided.

Some perspective of the logistics complexity, as presented to the Feedstock Manager, can be gained from the following “example” parameters. This example presumes that operations will be in the Upper Southeast United States where switchgrass is harvested over an eight — month harvest season, August through March. (The switchgrass is left to dry standing in the field and harvested when field conditions are satisfactory throughout the winter.) Suppose the supply area has 199 SSLs within a 30-mile radius of the plant, and each SSL has a different amount of material stored. (The visualization shown in Figure 13.11 will help the reader understand the complexity.) The farmgate contractors all want to fill their SSLs at least twice during the harvest season in order to minimize per-ton SSL investment. The Feedstock Manager’s job is to coordinate load-haul operations such that each farmgate contractor is treated fairly. Suppose there are five SSL load-out operations under contract and each of them wants the same opportunity to earn income (total tons hauled per year). The Feedstock Manager’s job is to treat all contractors fairly — not a simple task.

The example can be complicated further. Storage losses increase with time in storage. If the bioenergy plant requires farmgate contractor A to store for a longer period than farmgate contractor B, then contractor A will have higher storage losses and should be compensated. Contractor A filled its SSL on time — it is not their fault that hauling was delayed. One can expect that days-in-storage will be a factor in the farmgate contract.

14.10.1 Delivered Cost and Woody Biomass Logistics

For facilities using woody biomass as a fuel or raw material, a central objective of logistics management is to reduce the delivered cost of the material. For woody biomass, delivered cost generally includes three core components: stumpage, forest operations costs, and transportation costs. Stumpage is the term used in the forest sector to denote the fee paid to owner of the raw material, typically the landowner. Stumpage costs are highly variable and regionally specific, but biomass generally has the lowest stumpage cost of any material removed from the forest. In contrast, operations costs for biomass, especially logging residues, can be quite high compared to large diameter roundwood. Operations costs include all on-site harvesting, handling, and processing, as well as handling and processing at intermediate transfer points, like concentration yards. Operations costs can be accounted for using a marginal costing approach, where biomass is considered a by-product of the production of high-value products that support most of the operations costs, or a joint product costing approach where biomass is considered a co-product and operations costs are proportionally allocated among all products, including biomass [10]. Transportation costs most often cover a single motor carrier transporting material from the harvest site to the end user, but may include multiple trucking segments, depending on logistics. If a short-haul transportation segment is required to bring slash or processed biomass from the harvest site to a nearby concentration yard, short-haul transportation costs may be included in operations costs, especially if the short haul is conducted by the logging contractor. In general, if the total costs of delivering woody biomass to a facility exceed the price that the end user is willing to pay, the material is left to decompose or burned on site to reduce fire risk and open growing space for regeneration. In some cases, the net costs of woody biomass utilization may be offset by revenues from higher value products if biomass use is uneconomical but desirable for other reasons. For example, utilization may be used as an alternative disposal method in situations where open burning is prohibited.

Different logistics costs may be borne by different organizations along the supply chain, or by a single firm in a vertically integrated operation. In locations where biomass sup­ply chains are characterized by independent firms specializing in land investment, forest management, harvesting, transportation, and conversion, the details of cost structure are typically proprietary because efficient operations are a competitive advantage for com­peting firms. In this context, firms along the supply chain typically interact on price (e. g., stumpage price or gate price for delivered material). However, a number of different sources of information can be used to guide logistics management with regard to costs. The most important and reliable form of cost information is transaction evidence, or records of costs and prices from previous market transactions. In addition, in well-developed biomass mar­kets individual firms are often surveyed by public agencies or industry organizations that aggregate market information, especially prices, into stumpage reports and other similar market data reports, which are available for free or for a fee. Government land management agencies sometimes have publicly available data and methods that characterize the value and costs of forest products from public land, including fuel wood and biomass. For forest operations, a large body of research is devoted to quantifying and improving the cost struc­ture of woody biomass harvesting and processing. These data can be compiled to provide delivered estimates for a certain size and type of facility in a specific location.

At least two approaches are possible to produce cellulosic bioenergy without having detri­mental impacts on wildlife: produce bioenergy crops from lands already in crop production and use land use practices that are compatible with wildlife to produce them [74]. In the case of cellulosic biofuel crops there are limited studies showing that perennial grasses such as switchgrass and M. x giganteus can have some benefits for bird species. In a modeling study, Murray et al. [75] projected that bird species which were management priorities in Iowa would be increased by converting row crops to switchgrass but that other, more com­mon birds that depended on annual crop fields would be diminished in population. Similarly, in a field study of M. x giganteus and row crop fields in the United Kingdom., Bellamy et al. [76] showed that recently planted M. x giganteus fields had higher populations of breeding birds but speculated that these advantages would be lost as the M. x giganteus matured and, especially, as weed populations decreased. Tilman et al. [77] postulated that low input, high diversity grasslands for biomass production would be beneficial because higher diversity would be favorable for insects and wildlife. Furthermore, compared to annual crops, limited use of pesticides on perennial bioenergy crops will also benefit wildlife.

Unlike most annual crops, there will be possibilities for multiple harvests and variable timing of harvest for many of the perennial cellulosic bioenergy crops. Wildlife benefits from bioenergy grasses will only be achieved if harvests are scheduled to avoid local nesting or rearing seasons. Biomass cropping systems that include multiple harvests during the summer months will provide little benefit to wildlife [78]. Standards for harvesting of Conservation Reserve Program (CRP) perennial grasses to benefit wildlife may be applicable to bioenergy grasses in the parts of the country where there is substantial land in CRP grasses. Stubble heights are critical to wildlife when harvesting herbaceous vegetation and leaving higher stubble can result in much better nesting success for grassland nesting ducks and other waterfowl. Higher stubble can also trap more snow, shade the soil, and decrease evaporation [78]. Of course stubble left in fields is unharvested biomass and experiments are needed to determine how much biomass is needed for wildlife and what the economic cost is. Recommended harvest heights for perennial bioenergy grasses should be examined based on wildlife needs as well as biomass harvest goals. The best harvest scenario on a landscape scale is one that provides a mosaic of harvested and unharvested fields, but this has to be economically feasible [74].

Wildlife effects of land conversion to SRWC will depend on the type of land converted and the landscape in which the conversion takes place [79]. In general, conversion of annual cropland to SRWC will increase biodiversity but conversion of mature grasslands or forest to SRWC will likely result in a decrease in wildlife biodiversity [80,81]. Compared to corn, or other row-crops, conversion to either SRWC (poplar or pine) or conversion to perennial grasses has a positive effect on bird biodiversity. Management practices that increase landscape heterogeneity, reduce chemical input, and delay biomass harvesting until after bird (or mammal) breeding will help increase biodiversity [80].

The woody biomass supply chain varies by region and land ownership type. The primary sources of woody biomass are federal, industrial, state, and private forests managed for a variety of objectives. Ownership and management objectives affect the availability, volume, and quality of biomass harvested, as do forest age, the type of woody biomass being harvested, tree species present in the forest, and the type of harvesting system. For example, short-rotation hybrid poplar energy crops, pre-commercial thinnings in pine plantations, wood utilized from fuels-reduction treatments to reduce the risk of catastrophic wildfires, and logging residues from industrial silviculture all produce different yields and quality of woody biomass. Moreover, the details of the supply chain depend heavily upon the material specifications of the final, delivered product for a particular end use or conversion process. For example, some drop-in liquid biofuel conversion processes that rely on digestion are well suited for delivery of high moisture content materials, while other processes, such as densification to pellets or briquettes, may require both low ash content (e. g., <1%) and low moisture content (e. g., <12%). Thus, to some extent, the specifications of the end product dictate the nature of the supply chain, including: (1) the characteristics of the raw material, (2) the number and types of preprocessing steps required to meet feedstock specifications, (3) the cost effectiveness of alternative transportation modes, and (4) the area of the procurement region needed to supply the facility.

Cost per unit produced (bushel, ton, etc.) of a crop may fall with increased farm size or scale. Economies of size and scale arise from costs that do not increase proportionately to the area of land being farmed or the quantity of the product being produced. For example, a tractor driver operating implements 20 feet in width may cost the same per hour as a driver operating similar implements 40 feet in width. The cost of the driver per acre or hectare is far less for the driver pulling 40 feet wide implements. Similarly, the purchase price of many implements, tractors, and structures may increase at a fraction of the rate of increase in their capacity. Therefore, the ownership cost per unit of work completed may be lower for the larger machinery when both sets of machinery are used to capacity. Economies of scale can be seen in enterprise budgets for differing field sizes and underlying farm sizes for the same crop in the same location.

Diseconomies of scale also exist. As farms and other businesses become larger, the required quantity of management increases. Additional people may be employed and addi­tional layers of management may be required to coordinate activities.

Economies of scale also exist in acquisition of inputs and selling products. Average price per unit purchased may be reduced for large volume orders that reduce the selling costs incurred by suppliers. Smaller-scale farmers may achieve the benefits of economies of scale by working with other farmers or by hiring custom services to employ specialized equipment or oversized equipment without owning it. Marketing associations and buying clubs allow groups of farmers to acquire benefits of large volume transactions.

Sustainability standards and certification systems have been criticized for creating entry barriers and adding burdens to small-holders. The demanding, knowledge-intensive techni­cal requirements and the certification process itself can exclude small-holders who are not given adequate extension service support or training in how to adapt to new standards [15]. The high financial, time, and opportunity costs of implementation can cause additional burdens, resulting in income loss and market access restrictions for small-scale farmers and enterprises, particularly those considered among the poorest [11, 25]. Sometimes the extra investment and effort needed to gain certification status does not pay off in terms of price premiums gained for certified products. Existing developing country suppliers might lose their position in global market chains as rising standards create new challenges [11]. If and when a standard becomes widely accepted, it could become de facto purchasing criteria. Buyers may be less willing to pay extra premiums for standards compliance, thus leaving producers to bear the burden of higher production and compliance expenses but with no direct financial incentive apart from market access [11]. When expected benefits do not materialize in the short term, the hidden costs of compliance undermine effective and cohesive collective action by cooperatives or associations designed to take advantage of certification systems [11].

Sustainability standards and certification systems have also been criticized for exacerbat­ing inequalities in commodity chains. Even when producers receive some benefits, power relations remain unaltered when producers are non-participants in the decision making pro­cesses that affect them [11]. Downstream actors such as retailers can set higher consumer prices due to the value attached to symbolic attributes of the products; yet these higher prices do not always yield higher producer prices. Therefore, the inequalities of value distribution within different stages of certified chains are often higher for certified chains compared to conventional chains [15]. Moreover, sustainability standards and certification systems may enhance product quality and environmental outcomes for export-oriented production, giving the appearance of success, but fail to create incentives for sustainability in domes­tic markets, hence creating additional difficulties for companies wanting to produce for both markets.

Observers have further criticized sustainability standards for their failure to recognize and uphold certain social criteria for sustainability. For example, the Ethical Trading Initiative (ETI) fails to address gender-specific concerns of female workers and farmers arising from their domestic and household responsibilities [38]. Furthermore, the degradation of social well-being for populations in producing countries is one implication of uneven, unequal standards-induced employment and income in these areas. Some scholars go as far as to question the democratic legitimacy of sustainability standards, noting that “What private food governance does not foster and, in fact, tends to worsen, however, is the aspect of the social sustainability of the global agrifood system” [25].

The national context in which sustainability standards are implemented greatly influences the success or failure to reach compliance and enhance sustainability. Indonesia, where sustainable forestry standards conflict with local land tenure arrangements, provides a good example. The logic of certification does not adapt well to the political economy of land use in Indonesia. Certification systems rely on evaluations occurring in specific forest units, but the system of forest governance in Indonesia does not respect the integrity of such units [10]. Certification requires clearly defined forest boundaries and clear classification of forest types. Such clarity, however, does not exist in Indonesia, as 90% of state forest land has ambiguous legal status. Ambiguity results from conflicting interpretation of land rights and land use practices between the central government and customary, community-based land rights (adat). Land reforms to address these issues have stalled.

Social sustainability is often ignored by national governments who choose not to respect local land rights by leasing land directly to TNCs. The resulting predicament runs counter to FSC principles. FSC principle 2.2 says, among other things, that.. local communities with legal or customary tenure or use rights shall maintain control, to the extent necessary to protect their rights or resources, over forest operations unless they delegate control with free and informed consent to other agencies…”. FSC principle 3 includes that “… the legal and customary rights of indigenous peoples to own, use and manage their lands, territories, and resources shall be recognized and respected…”. Despite these FSC principles, the

Indonesian Ministry of Forestry has often granted timber concessions to large Arms in areas where communities claim land use rights or where the legal status of the land is still unresolved [10].

Pressures to implement social sustainability standards will be based on the vigilance of CSO and the major buyers, including the U. S. government and major transportation companies, such as airlines. Pattberg [39] claims that effective market-based systems for governance toward sustainability outcomes must meet two basic conditions. Firstly, demand for eco-labeled products must be sufficiently high and steady to affect changes in production processes and business practices beyond temporary, “hot topic” public relation campaigns that are acted on in the media. To meet this condition, the champions (such as civil society organizations) of standards and certification systems must adequately inform consumers about existing choices. Secondly, effective private governance requires an adequate and consistent supply of certified products. When new systems are unable to provide a consistent visible presence in the market, they lessen their credibility, reduce their market share, and face difficulties in rivaling the non-certified products of competitors.

One shortcoming of sustainability standards and certification systems is their tendency to undermine social sustainability by marginalizing small-scale producers, enterprises, and retailers. Forest certification can also marginalize small-scale private forest owners and producers in developing countries. Certification adds cost to the production process, costs that are more heavily felt by small-scale producers who are unable to spread costs out across a larger operation. The result is loss in market share as they fail to cost-effectively meet market demands for certified timber and forestry products [18].

Shovel logging is the term used to describe a type of log or whole-tree forwarding in which a “shovel”, “swing machine” or long reach hydraulic loader built for forestry advances stems toward roadside using a series of 2-3 “swings”. Figure 14.6 shows a shovel logging system in which Douglas Fir stems are being advanced to a log landing using a shovel logging machine on moderate slopes, alongside a cable logging operation on steeper terrain.

14.6.4 Chippers

Wood chippers may be disk or drum machines and are available in a variety of sizes, from small, trailer-mounted models able to handle small diameter branch material, to mobile, whole-tree chippers that can process large diameter stems with high throughput in industrial operations. Whole-tree chippers may be paired with a separate loader or may

be self-loading. Tracked machines are able to work in the woods in order to minimize slash forwarding with a forwarder or excavator. Stationary machines work at a landing or concentration yard. Figure 14.7 shows a full mobile chipping unit processing commercially thinned stems at a log concentration yard in north Idaho. In general, chipping tends to work most efficiently when stems have high moisture content (i. e., “green” wood).

Fuel chips are most commonly used for thermal applications, such as boiler fuel, and for power generation. The presence of bark and foliage in the chips is generally not problematic in these applications, assuming that the presence of inorganic material can be controlled to reasonable levels. In addition, certain biofuel conversion technologies can utilize fuel chips, notably the thermochemical processes that gasify biomass or utilize some form of pyrolysis to convert the solid material to a liquid or gas.

Prices for commodities arise from the interaction of supply and demand. The point where the supply function intersects the demand function reflects the price at which quantity supplied equals quantity demanded. Given the myriad relationships affecting supply and demand, market clearing prices may be continuously changing. Artificially set prices may quickly become obsolete. The stochastic nature of prices links directly to the profit function of the farmer and of each supplier, handler and processor participating in the supply chain.

Logistics are very important in cellulosic crop to product systems. The costs of transport were mentioned previously as affecting demand or price over distance. Storage costs may similarly affect price or demand over time. If a crop is only harvested once per year and processed throughout the year, then almost all of the crop must be stored over periods ranging from a few days through to an entire year. Similarly, if the crop is harvested over several months and processed throughout the year, then the quantity processed outside of the harvest period must be stored from a few days up to the full length of the period. Costs associated with storage include investment in storage structures, handling costs of loading material into and out of the storage facility, interest on operating capital invested in the stock in storage, value of commodity lost to shrinkage in quantity and quality, and costs of managing risk for the stored material.

Demand, supply, and prices are usually contingent on quality. Typically, the concentration of the desired components in the feedstock is an important measure of quality. Price per gross unit of quantity of the feedstock may increase with higher concentrations of desirable compounds and decline with higher concentrations of undesirable compounds.

Value of co-products can be important for feedstocks. If co-products of a cellulosic chemical have value, processors may bid more for the feedstock and still generate profit. In effect, derived demand is increased.