The ongoing growth of corn–based ethanol production raises some fundamental questions about what impact continued growth will have on US and world agriculture. Estimates of the long–run potential for ethanol production can be made by calculating the corn price at which the incentive to expand ethanol production disappears. Under current ethanol tax policy, if the prices of crude oil, natural gas and distillers grains stay at current levels, then the break–even corn price is $4.05 per bushel. A multi–commodity, multi–country system of integrated commodity models is used to estimate the impacts if we ever get to $4.05 corn. At this price, corn–based ethanol production would reach 31.5 billion gallons per year. Supporting this level of production would require 95.6 million acres of corn to be planted. Total corn production would be approximately 15.6 billion bushels, compared to 11.0 billion bushels today. Most of the additional corn acres come from reduced soybean acreage. The demand for biotech corn varieties that allow for continuous corn production would increase dramatically as would the demand for corn, soybean, and wheat varieties that can be grown in marginal areas.
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Paper provided by Iowa State University, Department of Economics in its series Staff General Research Papers with number
12717.
Length: Date of creation: 09 Feb 2007 Date of revision: Publication status: Published in AgBioForum, 2007, Vol. 10, No. 1, pp. 11-18. Handle: RePEc:isu:genres:12717
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