Biofuels are used as renewable alternatives to traditional fossil fuels. Government agricultural policies are currently focused on the production and use of so-called first-generation biofuels (FGB). Partly because of the success of many FGB programs, concerns about food and water security have become important considerations in the policy arena. These considerations have led to the development of so-called second-generation biofuel (SGB) technologies, based on relatively low value feedstocks that thrive on marginal land. This changes the competitive environment for biofuels, as SGB’s do not need to compete directly with relatively high-value annual crops. To examine consequences of this situation on the future of mixed farming, we develop an agent based simulation model (ABSM) for the analysis of economic situations characterized by large numbers of dynamically interacting individuals located on a heterogeneous landscape. Like most policies designed with good societal intentions, we find that SGB crops may lead to significant and possibly unwanted trade-offs in agricultural economies. If energy prices become high enough, the model indicates that structural changes in the farming sector will be significant, resulting in a very different agricultural landscape than we see today.