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Impacts of Ethanol Policy on Corn Prices: A Review and Meta-Analysis of Recent Evidence

  • Condon, Nicole
  • Klemick, Heather
  • Wolverton, Ann

The literature on the impacts of biofuels on food prices is characterized by contradictory findings and a wide range of estimates. To bring more clarity to this issue, we review studies on U.S. corn ethanol expansion released between 2008 and 2013. Normalizing corn price impacts by the increase in corn ethanol volume, we find that each billion gallon expansion in ethanol production yields a 2-3 percent increase in corn prices on average across studies. We also conduct a meta-analysis to identify the factors that drive the remaining variation in crop price impacts across studies. We find that the modeling framework, projection year, inclusion of ethanol co-products, international biofuel production, and baseline and policy ethanol volumes explain much of the differences in price effects across studies and scenarios. Our study also distinguishes between analyses that estimate long-run equilibrium impacts of biofuels and short-run studies that consider the effects of unexpected policy or weather shocks, which can lead to temporary price spikes. We find higher impacts on corn prices per billion gallons of corn ethanol production in studies using a short-run framework; each additional billion gallons of ethanol causes a 5-10 percent increase in corn prices. Last, we examine a small number of studies that consider the implications of biofuel policies for food security worldwide. The literature suggests that biofuels expansion will raise the number of people at risk of hunger or in poverty in developing countries.

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File URL: http://purl.umn.edu/149940
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Paper provided by Agricultural and Applied Economics Association in its series 2013 Annual Meeting, August 4-6, 2013, Washington, D.C. with number 149940.

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Date of creation: 2013
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Handle: RePEc:ags:aaea13:149940
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