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The southern Great Plains of the USA has great potential to produce biofuel feedstock while minimizing the dual stresses of woody plant encroachment and climate change. Switchgrass (Panicum virgatum) cultivation, woody biomass captured during removal of the encroaching eastern redcedar (Juniperus virginiana) to restore grasslands and thinning of the native oak forest can provide an integrated source of feedstock and improve ecosystem services. In north‐central Oklahoma, we quantified productivity and ecosystem water use of switchgrass stands and degraded ecosystems encroached by eastern redcedar and compared these to native oak forest and tallgrass prairie ecosystems. We measured aboveground net primary productivity (ANPP) using allometric equations (trees) and clip plots (herbaceous), and evapotranspiration (ET) using a water balance approach from gauged watersheds, and calculated water use efficiency (WUE = ANPP/ET) from 2016 to 2019. Among vegetation cover types, ANPP averaged 5.1, 5.4, 6.0, and 7.8 Mg ha−1 year−1 for the prairie, oak, eastern redcedar, and switchgrass watersheds and was significantly greater for switchgrass in 2018 and 2019 (2 and 3 years post establishment) when it reached 8.6 Mg ha−1 year−1. Averaged across 2017–2019, ET was significantly greater in the forested watersheds than the grassland watersheds (1022 mm year−1 for eastern redcedar, 1025 mm year−1 for oak, 874 mm year−1 for prairie, and 828 mm year−1 for switchgrass). The mean WUE was significantly greater (9.47 kg ha−1 mm−1) for switchgrass than for the prairie, eastern redcedar, and oak cover types (6.03, 6.02, and 5.31 kg ha−1 mm−1). Switchgrass offered benefits of greater ANPP, less ET, and greater WUE. Our findings indicate that an integrated biofuel feedstock system that includes converting eastern redcedar encroached areas to switchgrass and thinning the oak forest can increase productivity, increase runoff to streams, and improve ecosystem services. [ABSTRACT FROM AUTHOR]