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Ethanol Transforms Agricultural Markets in the USA

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

Abstract

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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    File URL: http://www.blackwell-synergy.com/doi/abs/10.1111/j.1746-692X.2007.00053.x
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    Cited by:

    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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