Advanced biofuels such as cellulosic ethanol are of great interest for their potential to supply a significant portion of U.S. fuel needs plus advantages over corn grain-based ethanol. The sustainability of agriculture-based advanced biofuels depends on how farmers would respond in providing biomass feedstock, yet economic behavior by farmers has been under recognized by the science community. Focusing on markets and policy incentives, this research shows that farmers are unlikely to convert current grain cropland to grow a dedicated cellulosic biomass crop such as switchgrass. However, the financial incentives to harvest cellulosic biomass provided by the 2008 farm bill may stimulate corn production due to demand for corn grain for feed and ethanol and corn residues for advanced biofuels. The prospect of continuous, possibly expanding corn production for advanced biofuels raises the same environmental issues as for corn grain-based ethanol. To assure the environmental sustainability of advanced biofuels production, environmental policies are needed to complement existing bioenergy initiatives.