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The Cost to Mexico of U.S. Corn Ethanol Expansion

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  • Timothy A. Wise
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    Abstract

    More than 40% of U.S. corn is now consumed in the production of ethanol. With the United States by far the world’s largest producer and exporter of corn, this represents an estimated 15% of global corn production. A recent survey by the National Academy of Sciences estimated that globally biofuels expansion accounted for 20-40% of the price increases seen in 2007-8, when prices of many food crops doubled. This had a dramatic impact on poor consumers and on net-food-importing developing countries. Expanding U.S. production and consumption of corn-based ethanol, which has been encouraged by a range of U.S. government subsidies and incentives, is considered one of the most important biofuel programs in putting upward pressure on food prices. Mexico now imports about one-third of its corn from the United States. Using conservative estimates from a study on U.S. ethanol expansion and corn prices, we estimate the direct impacts of U.S. ethanol expansion on Mexican corn import costs. We find that from 2006-2011, U.S. ethanol expansion cost Mexico about $1.5 billion due to ethanol-related corn price increases. Other methodologies suggest the costs could be more than twice as high, surpassing $3 billion over the period.

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    File URL: http://www.ase.tufts.edu/gdae/Pubs/wp/12-01WiseBiofuels.pdf
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    Paper provided by GDAE, Tufts University in its series GDAE Working Papers with number 12-01.

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    Date of creation: May 2012
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    Handle: RePEc:dae:daepap:12-01

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    1. Gal Hochman & Deepak Rajagopal & David Zilberman, 2010. "Are Biofuels the Culprit? OPEC, Food, and Fuel," American Economic Review, American Economic Association, vol. 100(2), pages 183-87, May.
    2. Michael J. Roberts & Wolfram Schlenker, 2010. "Identifying Supply and Demand Elasticities of Agricultural Commodities: Implications for the US Ethanol Mandate," NBER Working Papers 15921, National Bureau of Economic Research, Inc.
    3. Timothy A. Wise, . "09-08 "Agricultural Dumping Under NAFTA: Estimating the Costs of U.S. Agricultural Policies to Mexican Producers"," GDAE Working Papers 09-08, GDAE, Tufts University.
    4. McPhail, Lihong Lu & Babcock, Bruce A., 2012. "Impact of US Biofuel Policy on US Corn and Gasoline Price Variability," Staff General Research Papers 34892, Iowa State University, Department of Economics.
    5. Nelson, J.A., 2013. "Ethics and the economist: What climate change demands of us," Ecological Economics, Elsevier, vol. 85(C), pages 145-154.
    6. Bruce A. Babcock, 2012. "The impact of US biofuel policies on agricultural price levels and volatility," China Agricultural Economic Review, Emerald Group Publishing, vol. 4(4), pages 407-426, November.
    7. McPhail, Lihong Lu & Babcock, Bruce A., 2012. "Impact of US biofuel policy on US corn and gasoline price variability," Energy, Elsevier, vol. 37(1), pages 505-513.
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    Cited by:
    1. Antonio Turrent Fernández & Timothy A. Wise & Elise Garvey, 2012. "Achieving Mexico’s Maize Potential," GDAE Working Papers 12-03, GDAE, Tufts University.

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