Economic feasibility of ethanol production from sweet sorghum juice in Texas

Abstract

Environmental and political concerns centered on energy use from gasoline have led to a great deal of research on ethanol production. The goal of this thesis is to determine if it is profitable to produce ethanol in Texas using sweet sorghum juice. Four different areas, Moore, Hill, Willacy, and Wharton Counties, using two feedstock alternatives, sweet sorghum only and sweet sorghum and corn, will be analyzed using Monte Carlo simulation to determine the probability of economic success. Economic returns to the farmers in the form of a contract price for the average sweet sorghum yield per acre in each study area and to the ethanol plant buying sweet sorghum at the contract price will be simulated and ranked. The calculated sweet sorghum contract prices offered to farmers are $9.94, $11.44, $29.98, and $36.21 per ton in Wharton, Willacy, Moore, and Hill Counties, respectively. The contract prices are equal to the next most profitable crop returns or ten percent more than the total cost to produce sweet sorghum in the study area. The wide variation in the price is due to competing crop returns and the sweet sorghum growing season. Ethanol production using sweet sorghum and corn is the most profitable alternative analyzed for an ethanol plant. A Moore County ethanol plant has the highest average net present value of $492.39 million and is most preferred overall when using sweet sorghum and corn to produce ethanol. Sweet sorghum ethanol production is most profitable in Willacy County but is not economically successful with an average net present value of $-11.06 million. Ethanol production in Hill County is least preferred with an average net present value of $-712.00 and $48.40 million when using sweet sorghum only and sweet sorghum and corn, respectively. Producing unsubsidized ethanol from sweet sorghum juice alone is not profitable in Texas. Sweet sorghum ethanol supplemented by grain is more economical but would not be as profitable as producing ethanol from only grain in the Texas Panhandle. Farmers profit on average from contract prices for sweet sorghum when prices cover total production costs for the crop.