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The Impacts of Ethanol on the US Catfish Farm Sector

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  • Zheng, Hualu
  • Muhammad, Andrew
  • Herndon, Cary W., Jr.

Abstract

In this study, we estimated catfish feed and farm price reduced form equations. Of particular importance was the impact of the recent increase in grain prices induced by ethanol production on feed cost and farm prices. This relationship was examined using an autoregressive distributed lag (ARDL) model. Results show that a 1% increase in corn prices caused a 0.134% and 0.263% increase in feed prices in the short- and long-run, respectively. Catfish farm prices increased by 0.106% (short-run) and 0.211% (long-run) given a 1% increase in feed prices. Between 2004 and 2008, corn prices increased from $2 to $6 per bushels. Taheripour and Tyner (2008) state that of the total increase, 25% was due to US ethanol subsidies and 75% was due to the increase in the price of crude oil. Given the $1 increase in corn prices (50%), this should result in a feed price increase of 13% and a farm price increase of 2.7% in the long-run. Park and Fortenbery (2007) found that for every percentage increase in ethanol production, corn prices increased by 0.16 % in the short run. From this we conclude that a 100% increase in ethanol production will cause catfish feed prices to increase by 4.21% in the long run, and catfish farm prices to increase by 0.89%.

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Bibliographic Info

Paper provided by Southern Agricultural Economics Association in its series 2009 Annual Meeting, January 31-February 3, 2009, Atlanta, Georgia with number 46248.

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Date of creation: 2009
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Handle: RePEc:ags:saeana:46248

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Related research

Keywords: catfish; price; catfish feed; ethanol; autoregressive distributed lag model; ARDL; Demand and Price Analysis; Research Methods/ Statistical Methods;

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  1. Baek, Jungho & Koo, Won W., 2007. "Dynamic Interrelationships between the U.S. Agricultural Trade Balance and the Macroeconomy," Journal of Agricultural and Applied Economics, Southern Agricultural Economics Association, vol. 39(03), December.
  2. M. Hashem Pesaran & Yongcheol Shin & Richard J. Smith, 2001. "Bounds testing approaches to the analysis of level relationships," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 16(3), pages 289-326.
  3. Park, Hwanil & Fortenbery, T. Randall, 2007. "The Effect of Ethanol Production on the U.S. National Corn Price," 2007 Conference, April 16-17, 2007, Chicago, Illinois 37565, NCCC-134 Conference on Applied Commodity Price Analysis, Forecasting, and Market Risk Management.
  4. Sahar Bahmani, 2008. "Stability of the Demand for Money in the Middle East," Emerging Markets Finance and Trade, M.E. Sharpe, Inc., vol. 44(1), pages 62-83, January.
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