Preliminary Assessment of the Droughtâ€™s Impacts on Crop Prices and Biofuel Production
AbstractDrought has sharply decreased the size of the US corn and soybean crops this year. While there is no way of knowing for sure how low yields will go, the continuation of hot and dry weather in the major corn and soybean producing areas indicates that yield losses could be of historic proportions. The potential economic impact of low yieldsâ€”particularly corn yieldsâ€”is heightened this year because of a low buffer stock of corn, and because 10 percent of our motor fuel supply comes from corn. This briefing paper presents preliminary estimates of the economic impacts of low US corn and soybeans yields. The impacts are estimated for the 2012â€“13 crop year that begins on September 1st. Because we do not know what future yields will be or what future gasoline prices will be, we make the preliminary estimates using a stochastic partial equilibrium model. This type of model solves for market-clearing prices for a large number of random â€œdrawsâ€ of yields and gasoline prices. The model is calibrated to information that is available to us at the current time, including the USDAâ€™s supply and demand projections and the level of futures prices for gasoline, corn, and ethanol.
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Bibliographic InfoPaper provided by Center for Agricultural and Rural Development (CARD) at Iowa State University in its series Center for Agricultural and Rural Development (CARD) Publications with number 12-pb7.
Date of creation: Jul 2012
Date of revision:
This paper has been announced in the following NEP Reports:
- NEP-AGR-2012-08-23 (Agricultural Economics)
- NEP-ALL-2012-08-23 (All new papers)
- NEP-ENE-2012-08-23 (Energy Economics)
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