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Ethanol Transforms Agricultural Markets in the USA


  • Pat Westhoff
  • Wyatt Thompson
  • John Kruse
  • Seth Meyer


summary In the United States the volume of ethanol produced from maize is increasing at a very fast rate. The high crude oil prices explain some of this growth, but government policies have also been instrumental by fostering the growth of the US ethanol industry. Tax credits and import tariffs have encouraged investment by increasing ethanol producer returns, while at the same time environmental regulations and mandated levels of renewable fuel use have encouraged, if not required, gasoline blenders to use ethanol. The growing biofuel industry has resulted in closer links between energy and agricultural markets more than ever before. Prices for maize and other grains have increased, feed rations have changed, and the expected taxpayer cost of traditional US farm commodity programs has sharply declined. In 2006, high petroleum prices along with supportive policies contributed to record high US ethanol prices and massive investment in even greater production capacity. The immediate implications for the European Union are higher world commodity prices as maize is reallocated to ethanol production. As biofuels represent a larger share of motor fuel use in the US than in the EU, the US experience is a useful point of comparison as EU energy policies are developed. Copyright The Agricultural Ecomomics Society and the European Association of Agricultural Economists 2007.

Suggested Citation

  • Pat Westhoff & Wyatt Thompson & John Kruse & Seth Meyer, 2007. "Ethanol Transforms Agricultural Markets in the USA," EuroChoices, The Agricultural Economics Society, vol. 6(1), pages 14-21, April.
  • Handle: RePEc:bla:eurcho:v:6:y:2007:i:1:p:14-21

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    References listed on IDEAS

    1. Muhammad, Andrew & Seale, James L. & Meade, Birgit Gisela Saager & Regmi, Anita, 2011. "International Evidence on Food Consumption Patterns: An Update Using 2005 International Comparison Program Data," Technical Bulletins 184306, United States Department of Agriculture, Economic Research Service.
    2. Silvia Coderoni & Laura Valli & Maurizio Canavari, 2015. "Climate Change Mitigation Options in the Italian Livestock Sector," EuroChoices, The Agricultural Economics Society, vol. 14(1), pages 17-24, April.
    3. Rafael Oliveira Silva & Luis Gustavo Barioni & Dominic Moran, 2015. "Greenhouse Gas Mitigation through Sustainable Intensification of Livestock Production in the Brazilian Cerrado," EuroChoices, The Agricultural Economics Society, vol. 14(1), pages 28-34, April.
    4. Hugo Valin & Ronald D. Sands & Dominique van der Mensbrugghe & Gerald C. Nelson & Helal Ahammad & Elodie Blanc & Benjamin Bodirsky & Shinichiro Fujimori & Tomoko Hasegawa & Petr Havlik & Edwina Heyhoe, 2014. "The future of food demand: understanding differences in global economic models," Agricultural Economics, International Association of Agricultural Economists, vol. 45(1), pages 51-67, January.
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    1. Whistance, Jarrett & Ripplinger, David & Thompson, Wyatt, 2016. "Biofuel-related price transmission using Renewable Identification Number prices to signal mandate regime," Energy Economics, Elsevier, vol. 55(C), pages 19-29.

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