IDEAS home Printed from https://ideas.repec.org/p/ias/cpaper/12-pb8.html
   My bibliography  Save this paper

Updated Assessment of the Drought's Impacts on Crop Prices and Biofuel Production

Author

Listed:
  • Bruce A. Babcock

Abstract

On August 10th, USDA released updated estimates of the size of this year's corn and soybean crops. Corn yields are now projected at 123.4 bushels per acre, which combined with a drop in projected harvested acres results in an estimated crop size of 10.8 billion bushels-down 17 percent from USDA's July estimates. Soybean production is now estimated at 2.7 billion bushels-down 11.7 percent from July projections. The sharply lowered production estimates suggest the preliminary assessment of the impact of the drought on crop prices and biofuel production that I conducted last month needs to be updated.1 In the preliminary July assessment, I estimated that a waiver of the conventional ethanol mandate would reduce corn prices by an average of 4.8 percent across the 500 model outcomes considered. The now lower estimates of corn production imply that this estimated impact of a mandate waiver is too low. However, corn and soybean production are not the only economic variables that have changed in the past month. The average gasoline price used in the July assessment was $2.50 per gallon, which was the average futures price for reformulated gasoline. The average price of the futures contracts from September 2012 to August 2013 is now $2.78 per gallon-up 11 percent. Higher gasoline prices imply greater market demand for ethanol, which reduces a mandate waiver's impact on corn prices. The net effect of higher gasoline prices and lower crop size on crop prices, and the impact of the mandate waiver, can only be determined by re-running the model used in my July assessment. The results from these updated model runs are presented here.

Suggested Citation

  • Bruce A. Babcock, 2012. "Updated Assessment of the Drought's Impacts on Crop Prices and Biofuel Production," Center for Agricultural and Rural Development (CARD) Publications 12-pb8, Center for Agricultural and Rural Development (CARD) at Iowa State University.
  • Handle: RePEc:ias:cpaper:12-pb8
    as

    Download full text from publisher

    File URL: https://www.card.iastate.edu/products/publications/pdf/12pb8.pdf
    File Function: Full Text
    Download Restriction: no

    File URL: https://www.card.iastate.edu/products/publications/synopsis/?p=1169
    File Function: Online Synopsis
    Download Restriction: no
    ---><---

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Condon, Nicole & Klemick, Heather & Wolverton, Ann, 2015. "Impacts of ethanol policy on corn prices: A review and meta-analysis of recent evidence," Food Policy, Elsevier, vol. 51(C), pages 63-73.
    2. Jones, Jason P.H. & McCarl, Bruce A., 2016. "Impacts of U.S. Production-Dependent Ethanol Policy on Agricultural Markets," 2016 Annual Meeting, July 31-August 2, Boston, Massachusetts 236258, Agricultural and Applied Economics Association.
    3. Avalos, Fernando, 2014. "Do oil prices drive food prices? The tale of a structural break," Journal of International Money and Finance, Elsevier, vol. 42(C), pages 253-271.
    4. Gbadebo Oladosu & Siwa Msangi, 2013. "Biofuel-Food Market Interactions: A Review of Modeling Approaches and Findings," Agriculture, MDPI, vol. 3(1), pages 1-19, February.
    5. Hao, Na & Colson, Gregory & Seong, Byeongchan & Park, Cheolwoo & Wetzstein, Michael, 2015. "Drought, ethanol, and livestock," Energy Economics, Elsevier, vol. 49(C), pages 301-307.
    6. Fernando Avalos & Marco Jacopo Lombardi, 2015. "The biofuel connection: impact of US regulation on oil and food prices," BIS Working Papers 487, Bank for International Settlements.

    More about this item

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:ias:cpaper:12-pb8. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: the person in charge (email available below). General contact details of provider: https://edirc.repec.org/data/caiasus.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.