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Biofuels and vertical price transmission: the case of the U.S. corn, ethanol and food markets

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  • Drabik, Dusan
  • Ciaian, Pavel
  • Pokrivcak, Jan

Abstract

This is the first paper to analyze the impact of biofuels on the price transmission along the food chain. Specifically, we analyze the U.S. corn sector and its vertical links to food and ethanol markets. The key result of this paper is that the presence of biofuels affects the price transmission elasticity only when the blender's tax credit is binding and the shock originates in the food market. Our another important result is that the response of corn and food prices to exogenous shocks in the corn or food markets is always lower in the presence of biofuels when the tax credit is binding. However, the results are mixed for the binding mandate. The sensitivity analyses indicate that our results are robust to different assumptions about the model parameters.

Suggested Citation

  • Drabik, Dusan & Ciaian, Pavel & Pokrivcak, Jan, 2014. "Biofuels and vertical price transmission: the case of the U.S. corn, ethanol and food markets," 2014 International Congress, August 26-29, 2014, Ljubljana, Slovenia 182697, European Association of Agricultural Economists.
    • Handle: RePEc:ags:eaae14:182697
    DOI: 10.22004/ag.econ.182697
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    Cited by:

    1. Ladislav Kristoufek & Karel Janda & David Zilberman, 2015. "Co-movements of Ethanol Related Prices: Evidence from Brazil and the USA," CAMA Working Papers 2015-11, Centre for Applied Macroeconomic Analysis, Crawford School of Public Policy, The Australian National University.
    2. Drabik, Dušan & Ciaian, Pavel & Pokrivčák, Ján, 2016. "The effect of ethanol policies on the vertical price transmission in corn and food markets," Energy Economics, Elsevier, vol. 55(C), pages 189-199.

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    Keywords

    Demand and Price Analysis; Resource /Energy Economics and Policy;

    JEL classification:

    • Q11 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Aggregate Supply and Demand Analysis; Prices
    • Q21 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation - - - Demand and Supply; Prices

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