Washington biofuel feedstock crop supply under output price and quantity uncertainty

Subsidized development of an in-state biofuels industry has received some political support in the state of Washington, USA. Utilizing in-state feedstock supplies could be an efficient way to stimulate biofuel industries and the local economy. In this paper we estimate supply under output price and quantity uncertainty for major biofuel feedstock crops in Washington. Farmers are expected to be risk averse and maximize the utility of profit and uncertainty. We estimate very large Washington price elasticities for corn and sugar beets but a small price elasticity for a third potential feedstock, canola. Even with the large price elasticities for two potential feedstocks, their current and historical production levels in the state are so low that unrealistically large incentives would likely be needed to obtain sufficient feedstock supply for a Washington biofuel industry. Based on our examination of state and regional data, we find low likelihood that a Washington biofuels industry will develop in the near future primarily using within-state biofuel feedstock crops. ► Within-state feedstock crop supplies insufficient for Washington biofuel industry. ► Potential Washington corn and sugar beet supplies very responsive to price changes. ► Feedstock supplies more responsive to higher expected profit than lower risk. ► R&D for conversion of waste cellulosic feedstocks is potentially important policy.