Bottlenecks, Drought, and Oil Price Spikes: Impact on U.S. Ethanol and Agricultural Sectors
AbstractProjections of U.S. ethanol production and its impacts on planted acreage, crop prices, livestock production and prices, trade, and retail food costs are presented under the assumption that current tax credits and trade policies are maintained. The projections were made using a multi-product, multi-country deterministic partial equilibrium model. The impacts of higher oil prices, a drought combined with an ethanol mandate, and removal of land from the Conservation Reserve Program (CRP) relative to baseline projections are also presented. The results indicate that expanded U.S. ethanol production will cause long-run crop prices to increase. In response to higher feed costs, livestock farmgate prices will increase enough to cover the feed cost increases. Retail meat, egg, and dairy prices will also increase. If oil prices are permanently $10-per-barrel higher than assumed in the baseline projections, U.S. ethanol will expand significantly. The magnitude of the expansion will depend on the future makeup of the U.S. automobile fleet. If sufficient demand for E-85 from flex-fuel vehicles is available, corn-based ethanol production is projected to increase to about 29 billion gallons per year with the higher oil prices. The direct effect of higher feed costs is that U.S. food prices would increase by a minimum 1.1% over baseline levels.
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Bibliographic InfoPaper provided by Iowa State University, Department of Economics in its series Staff General Research Papers with number 12935.
Date of creation: 15 May 2008
Date of revision:
Publication status: Published in Review of Agricultural Economics, Winter 2008, vol. 30 no. 4, pp. 604-622
Contact details of provider:
Postal: Iowa State University, Dept. of Economics, 260 Heady Hall, Ames, IA 50011-1070
Phone: +1 515.294.6741
Fax: +1 515.294.0221
Web page: http://www.econ.iastate.edu
More information through EDIRC
biofuels; food prices; corn acreage; crop prices; ethanol production;
Other versions of this item:
- Simla Tokgoz & Amani Elobeid & Jacinto Fabiosa & Dermot J. Hayes & Bruce A. Babcock & Tun-Hsiang (Edward) Yu & Fengxia Dong & Chad E. Hart, 2008. "Bottlenecks, Drought, and Oil Price Spikes: Impact on U.S. Ethanol and Agricultural Sectors," Review of Agricultural Economics, Agricultural and Applied Economics Association, vol. 30(4), pages 604-622.
- NEP-AGR-2009-02-14 (Agricultural Economics)
- NEP-ALL-2009-02-14 (All new papers)
- NEP-ENE-2009-02-14 (Energy Economics)
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