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Identifying Supply and Demand Elasticities of Agricultural Commodities: Implications for the US Ethanol Mandate

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  • Michael J. Roberts
  • Wolfram Schlenker

Abstract

We present a new framework to identify supply elasticities of storable commodities where past shocks are used as exogenous price shifters. In the agricultural context, past yield shocks change inventory levels and futures prices of agricultural commodities. We use our estimated elasticities to evaluate the impact of the 2009 Renewable Fuel Standard on commodity prices, quantities, and food consumers' surplus for the four basic staples: corn, rice, soybeans, and wheat. Prices increase 20 percent if one-third of commodities used to produce ethanol are recycled as feedstock, with a positively skewed 95 percent confidence interval that ranges from 14 to 35 percent.

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Bibliographic Info

Article provided by American Economic Association in its journal American Economic Review.

Volume (Year): 103 (2013)
Issue (Month): 6 (October)
Pages: 2265-95

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Handle: RePEc:aea:aecrev:v:103:y:2013:i:6:p:2265-95

Note: DOI: 10.1257/aer.103.6.2265
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Cited by:
  1. Michael J. Roberts & Wolfram Schlenker, 2011. "Is Agricultural Production Becoming More or Less Sensitive to Extreme Heat? Evidence from U.S. Corn and Soybean Yields," NBER Chapters, in: The Design and Implementation of U.S. Climate Policy, pages 271-282 National Bureau of Economic Research, Inc.
  2. Condon, Nicole & Klemick, Heather & Wolverton, Ann, 2013. "Impacts of Ethanol Policy on Corn Prices: A Review and Meta-Analysis of Recent Evidence," 2013 Annual Meeting, August 4-6, 2013, Washington, D.C. 149940, Agricultural and Applied Economics Association.
  3. Goodwin, Barry K. & Marra, Michele C. & Piggott, Nicholas E. & Mueller, Steffen, 2012. "Is Yield Endogenous to Price? An Empirical Evaluation of Inter- and Intra-Seasonal Corn Yield Response," 2012 Annual Meeting, August 12-14, 2012, Seattle, Washington 124884, Agricultural and Applied Economics Association.
  4. Stephen P. Holland & Jonathan E. Hughes & Christopher R. Knittel & Nathan C. Parker, 2011. "Some Inconvenient Truths About Climate Change Policy: The Distributional Impacts of Transportation Policies," Working Papers 1116, Massachusetts Institute of Technology, Center for Energy and Environmental Policy Research.
  5. Baumeister, Christiane & Kilian, Lutz, 2013. "Do oil price increases cause higher food prices?," CFS Working Paper Series 2013/10, Center for Financial Studies (CFS).
  6. Roberts, Michael J. & Tran, A. Nam, 2012. "Commodity Price Adjustment in a Competitive Storage Model with an Application to the US Biofuel Policies," 2012 Annual Meeting, August 12-14, 2012, Seattle, Washington 124869, Agricultural and Applied Economics Association.
  7. Santeramo, Fabio Gaetano, 2014. "On the Estimation of Supply and Demand Elasticities of Agricultural Commodites," MPRA Paper 56126, University Library of Munich, Germany.
  8. Nicolas Merener, 2012. "Globally Distributed Production and Asset Pricing:the Rise of Latin America in CME Soybean Futures," Business School Working Papers 2012-01, Universidad Torcuato Di Tella.
  9. Tran, A. Nam & Welch, Jarrod R. & Lobell, David & Roberts, Michael J. & Schlenker, Wolfram, 2012. "Commodity Prices and Volatility in Response to Anticipated Climate Change," 2012 Annual Meeting, August 12-14, 2012, Seattle, Washington 124827, Agricultural and Applied Economics Association.
  10. Ke Tang & Wei Xiong, 2010. "Index Investment and Financialization of Commodities," NBER Working Papers 16385, National Bureau of Economic Research, Inc.
  11. Wolfram Schlenker, 2011. "Comment on "Markets for Anthropogenic Carbon within the Larger Carbon Cycle"," NBER Chapters, in: The Design and Implementation of U.S. Climate Policy, pages 102-105 National Bureau of Economic Research, Inc.
  12. Hendricks, Nathan P. & Smith, Aaron D., 2012. "Comparing the Bias of Dynamic Panel Estimators in Multilevel Panels: Individual versus Grouped Data," 2012 Annual Meeting, August 12-14, 2012, Seattle, Washington 124548, Agricultural and Applied Economics Association.
  13. Steven T. Berry & Michael J. Roberts & Wolfram Schlenker, 2013. "Corn Production Shocks in 2012 and Beyond: Implications for Harvest Volatility," NBER Chapters, in: The Economics of Food Price Volatility National Bureau of Economic Research, Inc.
  14. Timothy A. Wise, 2012. "The Cost to Mexico of U.S. Corn Ethanol Expansion," GDAE Working Papers 12-01, GDAE, Tufts University.
  15. Roberts, Michael J. & Tran, A. Nam, 2013. "Conditional Suspension of the US Ethanol Mandate using Threshold Price inside a Competitive Storage Model," 2013 Annual Meeting, August 4-6, 2013, Washington, D.C. 150717, Agricultural and Applied Economics Association.
  16. Chen, Shuai & Chen, Xiaoguang & Xu, Jintao, 2014. "Impacts of Climate Change on Agriculture: Evidence from China," Discussion Papers dp-14-07-efd, Resources For the Future.

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