The Impact of Biofuel Mandates and Switchgrass Production on Hay Markets

The Renewable Fuel Standard mandates in the Energy Independence and Security Act of 2007 (EISA 2007) will require 36 billion gallons of ethanol to be produced in 2022, 16 billion gallons of which is to be produced from cellulosic feedstocks. To meet the mandate, it is estimated that 24.7 million acres would be used to produce 109 million tons of switchgrass in 2025. Since the majority of these acres likely would be converted from land currently producing hay, cattle production will be reduced. As a step toward understanding the impacts of biofuel mandates on cattle markets, a linkage between hay production and hay prices needs to be established. For lower quality hay, the results indicate that a 10% decrease in Oklahoma production led to a 5% increase in Oklahoma price. For all hay, including higher quality alfalfa hay, the price increase was only 2% because of the large effect of Texas hay production