Minimizing the Costs of Biorefinery Feedstock by Managing Perennial Crop Age: The Case of Brazilian Sugarcane

We develop and analyze an unexplored mechanism to reduce biorefinery supply chain costs when the feedstock is a perennial crop: adjusting the age structure, and hence yield, of the perennial feedstock. The non-monotonicity of the age-yield function introduces a non-convexity to the cost minimization...

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Bibliographic Details
Published in:Journal of agricultural and applied economics 2023-05, Vol.55 (2), p.376-398
Main Authors: Tregeagle, Daniel, Zilberman, David
Format: Article
Language:English
Subjects:
Age
Age composition
Agricultural economics
Agricultural production
Biodiesel fuels
Biofuels
Biomass
Biorefineries
Convexity
Cost control
Costs
Crops
Emissions
Ethanol
Greenhouse gases
Optimization
Raw materials
Refineries
Refining
Sugar industry
Sugarcane
Supply chains
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Summary:We develop and analyze an unexplored mechanism to reduce biorefinery supply chain costs when the feedstock is a perennial crop: adjusting the age structure, and hence yield, of the perennial feedstock. The non-monotonicity of the age-yield function introduces a non-convexity to the cost minimization problem. We show that, despite this, the problem has a solution and present analytic and numeric comparative statics, finding that larger refineries are most likely to benefit from optimizing age structure. The model is calibrated to the sugarcane industry in Brazil. The cost reductions from optimizing age, compared to the observed regional average age, are less than 1%.
ISSN:1074-0708
2056-7405
DOI:10.1017/aae.2023.21