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Crop-Based Biofuel Production with Acreage Competition and Uncertainty

Listed author(s):
  • Mindy L. Mallory
  • Dermot J. Hayes
  • Bruce A. Babcock

This paper examines the role of uncertain crude oil prices, uncertain crop yields, and competition for acreage on corn, soybean, and switchgrass prices under biofuel production mandates. We find enforcement of the cellulosic mandate is costly in that it raises equilibrium prices of all three crops through competition for acreage. However, crude oil prices largely determine industry profitability even in the face of high crop prices. Further we find that uncertainty in crude oil prices and crop yields causes higher corn, soybean, and switchgrass prices compared to a baseline with no uncertainty.

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File URL: http://le.uwpress.org/cgi/reprint/87/4/610
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Article provided by University of Wisconsin Press in its journal Land Economics.

Volume (Year): 87 (2011)
Issue (Month): 4 ()
Pages: 610-627

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Handle: RePEc:uwp:landec:v:87:y:2011:iv:1:p:610-627
Contact details of provider: Web page: http://le.uwpress.org/

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  1. Amani Elobeid & Simla Tokgoz & Dermot J. Hayes & Bruce A. Babcock & Chad E. Hart, 2006. "Long-Run Impact of Corn-Based Ethanol on the Grain, Oilseed, and Livestock Sectors: A Preliminary Assessment, The," Center for Agricultural and Rural Development (CARD) Publications 06-bp49, Center for Agricultural and Rural Development (CARD) at Iowa State University.
  2. J. Wu & R. M. Adams, 2001. "Production Risk, Acreage Decisions and Implications for Revenue Insurance Programs," Canadian Journal of Agricultural Economics/Revue canadienne d'agroeconomie, Canadian Agricultural Economics Society/Societe canadienne d'agroeconomie, vol. 49(1), pages 19-35, March.
  3. Simla Tokgoz & Amani Elobeid & Jacinto F. Fabiosa & Dermot J. Hayes & Bruce A. Babcock & Tun-Hsiang (Edward) Yu & Fengxia Dong & Chad E. Hart & John C. Beghin, 2007. "Emerging Biofuels: Outlook of Effects on U.S. Grain, Oilseed, and Livestock Markets," Food and Agricultural Policy Research Institute (FAPRI) Publications 07-sr101, Food and Agricultural Policy Research Institute (FAPRI) at Iowa State University.
  4. Abebayehu Tegene & Wallace E. Huffman & John A. Miranowski, 1988. "Dynamic Corn Supply Functions: A Model with Explicit Optimization," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 70(1), pages 103-111.
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  6. Miranowski, John & Orazem, Peter, 1994. "A Dynamic Model of Acreage Allocation with General and Crop-Specific Capital," Staff General Research Papers Archive 10695, Iowa State University, Department of Economics.
  7. Rozakis, S. & Sourie, J. -C., 2005. "Micro-economic modelling of biofuel system in France to determine tax exemption policy under uncertainty," Energy Policy, Elsevier, vol. 33(2), pages 171-182, January.
  8. Satheesh V. Aradhyula & Matthew T. Holt, 1988. "Risk Behavior and Rational Expectations in the U.S. Broiler Market," Food and Agricultural Policy Research Institute (FAPRI) Publications 88-wp33, Food and Agricultural Policy Research Institute (FAPRI) at Iowa State University.
  9. Zhang, Zibin & Vedenov, Dmitry V. & Wetzstein, Michael E., 2007. "Can the U.S. Ethanol Industry Compete in the Alternative Fuels' Market?," 2007 Annual Meeting, February 4-7, 2007, Mobile, Alabama 34867, Southern Agricultural Economics Association.
  10. Nick D. Paulson & Roger G. Ginder, 2007. "Growth and Direction of the Biodiesel Industry in the United States, The," Center for Agricultural and Rural Development (CARD) Publications 07-wp448, Center for Agricultural and Rural Development (CARD) at Iowa State University.
  11. Searchinger, Timothy & Heimlich, Ralph & Houghton, R. A. & Dong, Fengxia & Elobeid, Amani & Fabiosa, Jacinto F. & Tokgoz, Simla & Hayes, Dermot J. & Yu, Hun-Hsiang, 2008. "Use of U.S. Croplands for Biofuels Increases Greenhouse Gases Through Emissions from Land-Use Change," Staff General Research Papers Archive 12881, Iowa State University, Department of Economics.
  12. William F. Sharpe, 1964. "Capital Asset Prices: A Theory Of Market Equilibrium Under Conditions Of Risk," Journal of Finance, American Finance Association, vol. 19(3), pages 425-442, September.
  13. Satheesh V. Aradhyula & Matthew T. Holt, 1989. "Risk Behavior and Rational Expectations in the U.S. Broiler Market," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 71(4), pages 892-902.
  14. Shapouri, Hosein & Duffield, James A. & Graboski, Michael S., 1995. "Estimating the Net Energy Balance of Corn Ethanol," Agricultural Economics Reports 34005, United States Department of Agriculture, Economic Research Service.
  15. Eckstein, Zvi, 1984. "A Rational Expectations Model of Agricultural Supply," Journal of Political Economy, University of Chicago Press, vol. 92(1), pages 1-19, February.
  16. Peter F. Orazem & John A. Miranowski, 1994. "A Dynamic Model of Acreage Allocation with General and Crop-Specific Soil Capital," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 76(3), pages 385-395.
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