PM 2042 October 2007

Introduction

The bioeconomy is the focus of research and discussion 

as a way to reduce dependence on imported oil, provide 

some relief from green house gas emissions and increase 

the use of agricultural products. Biofuels are a significant 

component of the bioeconomy. Ethanol and biodiesel are 

the primary biofuels used today. 

In the United States, ethanol is primarily produced from 

corn. However, there is a considerable amount of research 

and development occurring to develop the capability to 

produce ethanol from cellulous material. 

Switchgrass is one of the major plants considered in 

discussions of cellulous ethanol. Switchgrass (Panicum 

virgatum L.) is a perennial warm-season grass native 

to Iowa. In the past, it has been evaluated as an energy 

crop but primarily to replace coal. Using switchgrass to 

produce ethanol is a new use.

This report updates earlier production cost estimates for 

switchgrass. The earlier estimations were completed as a 

part of the study using switchgrass to replace coal. This 

information is available in Iowa State University (ISU) 

Extension publication Costs of Producing Switchgrass for 

Biomass in Southern Iowa, PM 1866). For more information 

on the agronomic aspects of switchgrass production, see 

the ISU Extension publication Switchgrass (AG 200).

The estimated costs of production are presented here in two 

sections. The first is the estimated costs. This is followed 

by a discussion of what could happen if we change the 

initial assumptions used to estimate the costs. Switchgrass 

costs are presented in three categories. The first is the 

production costs, which include establishment, reseeding 

and annual production. Next are the transportation costs; 

the final cost category considered here is storage.

Production

Establishment

We make several assumptions based on 2001 research 

findings, with costs updates using 2007 estimates. The ISU 

Extension Publication 2007 Iowa Farm Custom Rate Survey

(FM 1689) was used to compute machinery costs. Other 

costs come from the ISU Extension Publication Estimated 

Costs of Crop Production in Iowa - 2007 (FM 1712). Seed 

and chemical prices come from expert opinion.

Assumptions

(Note that these assumptions will be relaxed later, but they 

are used for the illustration that follows)

•	The switchgrass is frost-seeded with a 25 percent

probability of needing to reseed the stand 

•	The land charge assumed is $80 per acre

•	Switchgrass yield is 4 tons per acre

•	The switchgrass stand is assumed to last 11 years

•	The reseed is assumed to last 10 years

•	The interest rate used for prorating the establishment

costs is 8 percent, while the operating interest rate 

is 9 percent 

•	Operating costs are assumed to be borrowed for six months

•	The field is initially prepared by adding phosphorous and

potassium. There is also an application of lime assumed. 

Estimated Costs for Production, Storage 

and Transportation of Switchgrass
 2

Table 1: The estimated costs of establishing the 

switchgrass, presented in dollars per acre. 

Land Charge ................................................................ $80.00

Preharvest Machinery Operations Custom Charges

Disk ......................................................................................$9.45

Harrow ....................................................................................6.25

Airflow spreader (seed and fertilizers)...................................7.70

Spraying chemicals .................................................................5.15

Total ............................................................................ $28.55

Operating Expenses Price/unit Units

Seed ......................................$7.50/lb.....................6........$45.00

Fertilizer 

P....................................$0.37/lb...................30..........11.10

K....................................$0.23/lb...................40............9.20

Lime ...................................... $21/ton.....................3..........63.00

Herbicides

Pursuit + ........................ $53/gal................ 3 oz............1.24

MSO............................. $1.75/pt.............. 32 oz............3.50

	 2,4D ............................... $16/gal............ 1.5 pts............3.00

Total Operating Costs................................................ $136.04

Total Establishment .......................... $244.59

	 11 years at 8% amortization (.14008 factor)

Prorated Yearly Establishment 

Cost per Acre ............................$34.26

Reseeding Probability ......................................................25%

Land Charge ............................................................... $80.00

Preharvest Machinery Operations Custom Charges

Airflow Spreader (seed and fertilizers).................................$7.70

Spraying chemicals ................................................................ 5.15

Total............................................................................. $12.85

Operating Expenses Price/unit Units

Seed .......................................$7.50/lb.................. 6........$45.00

Fertilizer 

 P........................................$.37/lb...................30..........11.10

 K.......................................$.23/lb...................40............9.20

Herbicides

 Pursuit +.......................... $53/gal................ 3 oz............1.24

 MSO............................... $1.75/pt.............. 32 oz............3.50

2,4D................................. $16/gal............ 1.5 pts............3.00

Total Operating Costs.................................................. $73.04

Total Reseeding Costs ....................... $165.89

Expected Reseeding Costs (25% probability)......$41.47

Prorated Yearly Reseeding 

Cost per Acre ............................. $ 6.18 10 years at 8% amortization (.14903 factor) 

Table 2: The estimated reseeding costs per acre

It is assumed that a field needs to be reseeded 25 percent of the time.

Basic ground preparation and lime are not included for the reseeding.

Expected yield per acre ...................................................... 4 tons

Weight of large square bale ............................................... 950 lbs

Bales per acre ..........................................................................8.42

Land Charge ................................................................ $80.00

Preharvest Machinery OperationsCustom Charges

Liquid N application......................................................$4.80

Bulk fertilizer spreader.................................................... 3.20

Sprayer .............................................................................5.15

Total............................................................................. $13.15

Operating Expenses Price/unit Units

Fertilizer 

Nitrogen.....................................$.31/lb ........... 100 ...$31.00

	 Phosphorus (lbs/ton removed)... .37/lb .......... 1.94 .......2.87

	 Potassium (lbs/ton removed) .......23/lb .......... 22.8 .....20.98

Herbicides

 Pursuit ......................................$53/gal ............3oz .......1.24

 MSO....................................... $1.75/pt ..........32oz .......3.50

2,4D ..........................................$16/gal ....... 1.5pts .......3.00

Total............................................................................. $62.59

Interest on Operating Expenses, 6 mths @ 9%............. $3.41

Harvest Machinery Operations, Custom Charges

Mow/conditioning..............................................................$10.75

Rake ........................................................................................5.30

Baling; large square ($10.70/bale)....................90.11

Staging ($2.75/bale) .............................................................23.16

Total........................................................................... $129.31

Yearly Production Costs 

per Acre...................................$288.46

Prorated Establishment Cost .....34.26

Prorated Reseeding Cost..............6.18

Production Costs per Acre........$328.91

Production Costs 

per Ton............................. $82.23

Table 3: Estimated yearly production costs per acre

Assumptions

•	 A 4 ton per acre yield.

•	 100 pounds of nitrogen (N)is used. The herbicideslisted are

examples. Phosphorus and potassium are at removal rates.

•	 Harvesting is done in mid to late November. It will be

mowed, raked and baled, using a large square baler. 

Bales are 3x4x8 feet, with a weight of 950 pounds.

•	 The bottom of Table 3 also presents the total estimated

costs for producing switchgrass. Production costs 

are the sum of the establishment costs, the prorated 

reseeding costs and the annual production costs.

Production Costs
 3

Previous studies estimated the costs for storing 

switchgrass. The options considered include storing in: 

an open field, an open field on crushed rock covered with 

a tarp, an enclosed structure, and a pole building with 

open sides. These studies found that the enclosed building 

is the most expensive type of storage, but, because 

maintaining quality of switchgrass is very important for 

ethanol production, it is the method selected here. (Note 

that if switchgrass is used as a coal replacement, the 

quality consideration is not as critical and another storage 

option might be considered.) 

The costs of storing include not only the cost for the 

facility or method used but also include the value of the 

switchgrass in storage and dry matter loss associated with 

the various storage methods. 

The estimated storage costs are presented in Table 4 for an

enclosed building. (These cost assumptions are relaxed in 

later discussions.)

Since there are various types of enclosed buildings, 

we make several assumptions.

Building costs $12 per square foot........................$360,000

Yearly Costs:

Land, 2 acres........................................................................$160

Building; yearly ownership cost at 12%........................ $43,200

Storage Cost per Ton ....$16.67

Table 4: Storage

Assumptions

•	 The structure is a tarped hoop type structure and holds

5,454 bales or 2,591 tons.

•	 Assume a cost of $12 per square foot for the 

finished building. 

•	 Dimensions are 100x300 feet (30,000 square feet).

•	 The bales weigh 950 pounds or 0.475 tons and

	 are 3x4x8 feet.

•	 The bales are stacked 20 feet high or six bales high.

•	 The building and area are assumed to take two acres.

The extra space is for building edging, driveways and 

turnaround space for semi-trucks.

One issue that is not addressed is who owns the 

switchgrass while it is in storage. This aspect of the cost 

of production has not been decided. Therefore, we chose 

not to estimate it. There are at least two major costs that 

are not considered because of this decision. First, there is 

the value of the switchgrass over the time it is in storage. 

Second, and perhaps more important, is the insurance for 

the switchgrass and building. Storing this much dry hay 

could create a fire hazard.

Storage
Table 5: Transportation and Handling Costs

Field to Storage Costs:

5 miles to storage at 25 miles per hour;

Truck Costs

	 Load .5 hour; unload .33 hour; travel .4 hour

1.23 hours x $70.......................................................$86.33 

Loader Costs (labor, tractor and fuel)

($12 + $20 + $10.78 = $42.78/hour)

0.83 hours x 42.78....................................................$35.65 

Total Hauling Cost to Storage ................................$121.98

Transportation to Storage 

Cost per ton......................$6.10

Storage to Plant Costs:

30 miles one-way to plant at 45 MPH

 Plant will do the unloading at their cost

Truck Costs 

Load .5 hour; unload .33 hour; travel 1.33 hour

2.16 hours x $70.....................................................$151.67

Loader Costs (labor, tractor and fuel)

($20 + $10.78 +$12 = $42.78/hour)

0.5 hour x $42.78 .....................................................$21.39

Total Hauling Cost to Plant....................................$173.06

Transportation to Plant 

Cost per ton......................$8.65

Transportation and storage logistics will vary depending 

on the situation, so again, we make some assumptions.

Assumptions

•	 For these estimates, the switchgrass bales are staged

along the edge of the field. This cost is included in the 

production budget. A farmer with a typical tractor and 

bale fork can perform these duties.

•	 Another transportation cost is collecting, delivering

and unloading the bales into a storage facility. A semitrailer holding 20 tons (or 42 bales ) is used to haul the

switchgrass. Estimated times are 30 minutes to load

the truck and 20 minutes to unload. The charge for the 

semi is $70 per hour.

•	 A typical tractor and bale hauler will not work to

stack large square bales 20 feet high. More specialized 

equipment is needed for this task. Estimated costs of 

such a tractor were $20 per hour and $10.78 worth of

fuel per hour. The operator charge is $12 per hour.

Table 5 shows the estimated transportation costs. These

are shown in two categories; field to storage (5-mile trip)

and storage to plant (30-mile trip). It is assumed that the

Transportation and Handling

unloading will be done at the plant at plant expense.

There are two comments regarding these cost estimates. 

The loading and travel time to take the semi from field to 

field and then to a storage facility may be underestimated. 

It is possible, too, that if enough farmers raise switchgrass, 

they can haul it to the facilities themselves. This would 

change the cost estimates. However, the estimates used 

here present the opinions of several farmers who grow 

switchgrass.

Table 6 shows the total estimated costs for switchgrass. 

This includes production, storage and transportation.

 4

Table 6: Total Costs for Switchgrass:

Production ........................... $82.23

Storage................................... 16.67

Transportation to Storage........6.10

Transportation to Plant ............8.65

Total Cost per Ton ..... $113.66
$140

$120

$100

$80

$60

$40

Dollars per Ton

Nitrogen Prices Dollars per Pound

$0.25 $0.35 $0.45 $0.55 $0.65 $0.75

$140

$120

$100

$80

$60

$40

Land Charge

$50 $70 $90 $110 $130

$140

$120

$100

$80

$60

$40

Dollars per Ton

Yield in Tons per Acre

2 4 6 8 10

Estimated Switchgrass 

Production Costs per Ton with 

$80 per Acre Land Charge

Estimated Switchgrass 

Production Costs for 4 Ton Yield 

and Varying Land Charge

Estimated Switchgrass 

Production Costs for 4 Ton Yield 

and Varying Nitrogen Prices

Dollars per Ton

Estimating the cost of producing any crop will vary 

depending upon the assumptions made. Making 

assumptions is necessary, however, because we can’t 

model each individual farm, field, and situation. By 

varying some of the key assumptions we can determine 

areas that are the most critical in estimating the costs 

of production.

 5

Alternative Assumptions

What happens as the assumed yield is changed. 

These cost estimates are for production costs only. 

Notice that as the yield increases, the costs decrease, 

first at a rapid rate and then at a lessened rate. As 

the yields increase, the fixed costs of production are 

spread over more tons and the cost per ton decrease.

What happens using alternative land charges, while 

holding the yield constant at 4 tons per acre. With

these assumptions, the cost of production increases 

in a linear rate as the cost per acre increases.

The cost of switchgrass production alters as the cost 

per pound for nitrogen changes. Here, too, there is a 

direct relation between nitrogen prices and costs of 

production.

Figure 1

Figure 2

Figure 3
Estimated Switchgrass 

Production Costs per Ton with 

$80 per Acre Land Charge

There is also a direct relation between the cost to 

construct the particular type of storage assumed 

and the total cost of switchgrass. 

Figure 4

Estimated Switchgrass 

Production Costs for 4 Ton Yield 

and Varying Storage Costs

$140

$120

$100

$80

$60

$40

Dollars per Ton

Yield in Tons per Acre

$6 $8 $10 $12 $14 $16 $18 $20

 6

Alternative Assumptions (continued)
There is an impact on production when transportation costs vary. 

As the cost per hour increases, the total cost per ton increases but 

at a slower rate than when we increase the distance from the plant.

Figure 5 Figure 6

$140

$120

$100

$80

$60

$40

Dollars per Ton

Miles to Plant

$140

$120

$100

$80

$60

$40

Dollars per Ton

Dollars per Hour

$40 $50 $60 $80 $100

Estimated Switchgrass Production 

Costs for 4 Ton Yield and Varying 

Transportation Costs

Estimated Switchgrass 

Production Costs for 4 Ton Yield 

and Varying Distances to Plant

$70 $90 10 20 30 40 50 60 70 80 90 100

 7
 8

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cooperation with the U.S. Department of Agriculture. Jack M. Payne, director, Cooperative 

Extension Service, Iowa State University of Science and Technology, Ames, Iowa. 

File: Economics 1-8

The Future

The future of switchgrass production depends upon 

its potential commercial uses. If switchgrass is used as 

a feedstock for ethanol, replacement for coal or other 

technologies, further research is needed to increase yields. 

As shown in Figure 1, increasing yield will have the 

biggest impact on reducing the costs of switchgrass for 

any energy use.

The Conservation Reserve Program (CRP) may also play 

a role in the future of switchgrass. If green payments 

would be added to a switchgrass rotation on CRP land, 

there would be a larger economic incentive for producers. 

Switchgrass is a good alternative because it can be grown 

on marginal land and offers erosion control as well as 

other environmental benefits. 

For switchgrass to become a commercially viable crop, 

there must be available markets. For cropland, there 

must be a sufficient economic incentive for producers to 

change their rotation systems. More efficient harvesting 

and transportation methods must be adapted to improve 

profitability. In addition, logistical issues must be 

addressed and, perhaps most important, the issues of 

handling and storage must be addressed.

Switchgrass can become a viable bioenergy crop. The 

engineering is being refined. But, before switchgrass can 

become viable commercially, key farmer issues must be 

addressed.

Prepared by Mike Duffy, Iowa State University 

Extension economist
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