As an industry that relies upon the growth of plant material, the basic denominator of all supply chains is availability of suitable agricultural land. Land is also the foundation for most other agricultural industries, including forage and grain for beef, swine and poultry production as well as the commodity or row crops. Competition for land will be one of the primary challenges to overcome in achieving commercial scale biomass production [3]. However, developing a sustainable feedstock supply chain is much more complicated than simply finding available land. Commercializing dedicated energy crops requires not only finding land but also recruiting landowners to use their land for biomass production. Recruiting landowners is a difficult task that must address several factors, including out — of-pocket costs, return to land and labor, competing land uses and existing relationships on the land.

It is often said that “marginal” land will be used for production of energy crops. But what is marginal land? Is it abandoned agricultural land? Fallow land? Land used simply for grazing or pasturing of animals? The definitions are broad and challenging and no two people can agree on a sound definition. It is safer to say that the use of agricultural land will be determined by its owner, who is guided by several factors: financial return, existing relationships (lease holders), and their farm management skills. For any available land to be enrolled in energy production, it must provide the right value to the farmer, both financially and as it fits with the landowner’s management objectives. There is no argument that some land areas are more suitable for certain types of biomass production, while other areas are either not suitable or simply unavailable. In a perfect world, each acre of agricultural land would undergo a rigorous evaluation to determine its highest value and best use. In reality, though, there are many other factors that influence decisions made regarding land use.

When landowners make decisions regarding how to use their land, the current use, current and projected level of management, and several community-oriented issues all influence their final determination. However, the most influential factor and what usually finalizes the decision is whether or not a particular land use will be profitable to the landowner [4]. When commercializing energy crop production, landowners and farmers typically think about the cash flow of their operations in annual terms. Operating capital outlays offset by harvest season income is the common modus operandi for commodity row crops. However, when planning financial operations related to dedicated energy crops, the timeframe between outlays and income is much more extended and no longer fits with traditional agricultural operations. To willingly invest in in biomass production for cellulosic bioenergy operations, landowners and farmers must understand and be comfortable with this key difference and know how to plan accordingly. Simply comparing the current year’s return from a crop like soybeans to the possible return from the same acre with switchgrass would not be a valid or accurate comparison. Similarly, comparing the current year’s annual return on hay production to that from an energy crop on the same acre would not be accurate either. In both cases, many other factors can impact the annual return.

For row crops, annual returns are impacted by weather, global demand, and many other factors. Over the last three to four years, a variety of these factors have convened to make commodity prices for corn and soybean reach record levels [5]. These current high commodity prices make producing corn and soybeans on less productive acres more attractive. As a result, many agricultural areas have seen an expansion of these crops onto land where row crops have traditionally not been grown, as farmers can afford to take a lower yield per acre and still achieve a break-even or profitable return on investment with the current market. This expansion of row crops into less productive areas will impact land availability for energy crop production. Likewise, forage markets are significantly driven by annual weather patterns. During 2012, there was an intense drought throughout the central portion of the United States and, therefore, prices for hay moving out of the southeast reached near record levels. To compare these one-year returns to energy crop production on similar acres, the landowner and/or farmer must evaluate long-term benefits.

Energy crop production can bring a significant multiyear benefit to the landowner or farmer. In most cases, it is envisioned that long-term (5-10 year) contracts will be utilized to reduce risk for both the conversion facility and the producer. These long-term contracts will guarantee price stability over the contract period. Given that most dedicated energy crops’ drought tolerance is greater, yield variation due to weather will be minimal compared to traditional row crops, thus resulting in more consistent yields over time. Consistent yields lead to more consistent returns in long-term contracts. As landowners and farmers evaluate energy crop production, they should compare returns from the previous 10 years of competing land use against potential 10-year returns from the selected energy crop. Only then can a clear decision be made based on financial returns per acre of land.