SWITCHGRASS CAPACITY PROCUREMENT CONTRACT AND TONNAGE CONTRACT PRICING

The on-farm production of switchgrass has been given considerable attention by farmers, policymakers and others. However, because the switchgrass market is not developed yet, most of the research only focuses on the switchgrass breakeven cost. The appropriate price combining interests of both the biorefinery and the farmers, or the contract price, has not been given enough attention.

Two types of contractual relationships are discussed in this thesis: Capacity Procurement Contract (CPC, per acre contract) and Tonnage Contract (TC, per ton contract). The contract prices of switchgrass under these two types of contracts are estimated in this analysis. Because the land quality and soil type also affect the yield and average cost of switchgrass production and corn production, the type of landscape also affects the contract price of switchgrass. Using west Tennessee as a case study, contract prices under four types of landscapes are analyzed: (i) a welldrained level upland (WDLU), (ii) a well- to moderately well-drained floodplain (WDFP), (iii) a moderate to somewhat poorly drained eroded sloping upland (MDSU), (iv) a poorly drained floodplain (PDFP). This research suggests that the MDSU land is the top choice for the biorefinery. Under the capacity procurement contract, the switchgrass contract price on MDSU land is $474 per acre. Under the tonnage contract, the switchgrass contract price on MDSU land is estimated to be $77 per ton. Compared to the capacity procurement contract, a tonnage contract is preferred by the biorefinery because the tonnage contract has more post contract risk advantage than the capacity procurement contract with regard to the unexpected change in switchgrass yield.