In the United States, corn remains the primary raw material for producing ethanol, creating a close link between energy markets and feed prices. However, according to a new study from Bloomberg New Energy Finance (BNEF), processes using cellulosic materials for biofuel production could become competitive with those using corn within just a few years.

Cellulosic materials for ethanol production could include crop residues, household or manufacturing waste products or crops grown specifically for the purpose.

Today, the cost of producing cellulosic ethanol is about 40 percent higher than that for corn-based ethanol. Production costs for sugar-cane ethanol, such as that produced in Brazil, are slightly lower than processes using corn.

According to the BNEF report, improved processes for cellulosic ethanol could bring production costs down to those for corn or sugar cane as early as 2016.

Technology for cellulosic ethanol production already has improved considerably, with resulting declines in operating costs according to the report. The cost of enzymes used to break down cellulose for example, has come down 72 percent between 2008 and 2012.

But while operating costs are coming down, capital expenditures on ethanol plants remain the largest expense. Respondents to the survey expect capital expenses to account for 45 percent of total costs. Feedstock will contribute about 34 percent of total costs, the respondents estimate. The authors suggest the industry will need to focus on finding ways to reduce the initial outlay in building and activating cellulosic plants to become more competitive in coming years.

Cellulosic ethanol production currently is a small industry compared to corn-based production. According to BNEF, there are 14 enzymatic hydrolysis pilot plants in operation globally, nine demonstration-stage projects and 10 semi-commercial-scale cellulosic plants either announced, commissioned, or due online shortly. Five of the semi-commercial facilities are located in the United States and two are in Brazil.

Cellulosic ethanol won’t completely replace corn-based production in the United States anytime soon. But if the product becomes cost-competitive, livestock producers could see benefits from reduced competition in the corn market and potential opportunities to grow alternative crops for cellulosic ethanol on ground not suited for corn production.