Farmers in the northern Plains have the potential to supply large quantities of biomass. With respect to demand for biomass, federal policies, including the Energy Independence and Security Act of 2007, and the creation of a national Renewable Electricity Standard, form important future market opportunities.

Moreover, several state renewable energy initiatives foster additional regional demand.

Before a farmer begins establishing a biomass crop, he or she is encouraged to research and indentify biomass market purchasers that offer an economic return above production and transportation costs. Increasing federal and regional biomass demand does not always imply that those same market opportunities exist locally.

Two different markets for biomass are likely to develop in the future. One market will utilize chemical or enzymatic processes to convert biomass into liquid biofuels and other high-value renewable products. A second market will use thermal, pyrolysis or gasification processes to use biomass energy for the production of electricity, syngas, steam and other forms of energy.

In both markets, the two most important criteria buyers will utilize to determine the value of the biomass delivered to a plant site are the quantity of biomass supplied as measured by weight in tons and the moisture content. If the biomass buyer is using either an enzymatic or thermal process, they would prefer to purchase "bone dry" biomass, which is biomass that contains no water.

In thermal processes, additional water reduces the net energy of the biomass supplied because a portion of the biomass must be utilized to remove the water prior to burning. However, why is water problematic for enzymatic biomass processes in which biofuel plants usually have to add water during hydrolysis?

The problem is that biomass with moisture content above 20 percent becomes moldy when stored for even short periods of time. These molds interfere with the plants' sensitive enzymatic and chemical processes, which renders entire batches of product useless. Therefore, as a precaution, they only purchase biomass with less than 20 percent moisture.

Drying and delivering bone dry biomass usually isn't physically possible, so most biomass buyers place an upper limit on biomass moisture content they are willing to tolerate before quality discounts begin to be applied. Typically, this moisture percentage is 20 percent. Several buyers increase the discount for biomass between 20 and 35 percent moisture and 35 and 50 percent moisture.

Again, farmers are encouraged to consider their time and transportation costs because of steep discounts for more than 20 percent moisture, which may render the biomass uneconomical for delivery.

While weight and moisture are uniformly measured by all biomass purchasers, additional quality discounts may be applied depending on whether the biomass will be used for enzymatic or thermal conversion. If thermal conversion, the buyer is interested the most in the amount of energy the farmer is providing in the biomass delivered. The industry measures energy content in British thermal units per ton (Btu/ton). One of the most immediate markets for biomass is for electrical utilities to co-fire coal with biomass and produce renewable electricity. Since coal typically is sold on the basis of Btu/ton, biomass is priced accordingly on its ability to replace the heat content in coal. One biomass buyer, Show Me Energy Cooperative in Centerview, Mo., has developed a proprietary technology to instantly test and determine biomass Btu content upon delivery to their plant.

Additional quality criteria may be applied locally, but it depends on the specific conversion technology employed. Again, the type of commercial boiler used to co-fire biomass may impose additional criteria.

For example, alkali and various trace minerals may result in "slagging" within some older coal boilers. Additional tests and quality discounts may ensue.

Consequently, decision aides to help farmers determine the bottom line profitability of biomass contain information on alkali content, so discount information can be obtained from specific local buyers. This enables a producer to calculation true net returns.

A program producers can use to determine profitability is available at www.ag.ndsu.edu/energy/biofuels. Click on Producer Model for Biomass Comparison in the text.

In addition to commercial biomass markets, farmers with ample biomass resources should not overlook local consumer demand. Many rural residents and businesses have installed wood, corn or pellet stoves. Biomass can be made denser by pelleting, compaction or other techniques and then marketed locally. Big-box retailers typically sell biomass pellets for almost $200 per ton. This can provide farmers with an attractive return on lower-quality biomass with minimal additional processing costs.

As biomass markets expand in volume and scope, trading disputes will occur.

Eventually, market trading standards, such as those defining market criteria for commodity grains, will be established. In addition, resources, such as independent testing labs, will be created to mediate disputes. North Dakota State University has established a biomass testing lab to collect research data and facilitate the growth of biomass trading.

How profitable will future biomass markets become for producers? Given the wide variety of biomass farmers are capable of producing, the market likely will be quite competitive. A number of biomass firms purchasing biomass utilize a low- bid buying scheme whereby farmers submit the lowest price they are willing to take for their biomass. Buyers then select the lowest submitted prices until they reach the desired quantity of biomass delivered.

Nevertheless, emerging biomass markets represent a new opportunity for farmers.

Producers need to carefully determine the total cost of production, transportation and storage expenses and possible quality discounts to ensure the local market opportunity is indeed profitable and viable for a long time.

By Cole Gustafson, Biofuels Economist, NDSU Extension Service