Impacts of the Federal Energy Acts and Other Influences on Prices of Agricultural Commodities and Food
Most of the increase in ethanol production in the 2008-2012 period can be attributed to the Energy Independence and Security Act of 2007 (EISA) and earlier federal energy legislation. The expansion in U.S. biofuel production, particularly ethanol, was the predominant cause of the elevated commodity prices. Other influences documented were a weak dollar, speculation and an increasingly inelastic commodity demand function. The supply function displayed more elasticity as crop farmers responded to rising profits. Upward pressures on commodity prices from EISA will ease as grain ethanol production will level off but will continue to support the market. The biodiesel industry, as well as dry mill ethanol plants, will benefit from the expansion in the extraction of corn oil from distillers’ dried grain. A major offset to the amount of corn diverted from livestock to ethanol was the increased availability of distillers’ dried grain (DDG), a mid-protein feed. As a percent of total protein feed, utilization of DDG increased from 8% in crop years 2001-2005 to 18% in 2007-2011. While retail food prices increased by 20% between 2002-2006 and 2008-2012, higher agricultural commodity prices accounted for only a 3.80% increase. Over a percentage point of this increase was due to higher energy prices which raised the cost of production on crops, reducing the agricultural commodity price contribution to 2.77%. The net effect was further adjusted downward to 2.38% to account for savings in federal farm subsidies; then adjusted upward to 2.50-2.57% to factor in the costs of the blenders’ tax credit in EISA in 2007-2011 and projected to 2021. The conclusion is that EISA and earlier energy legislation has had and will continue to have a minor impact on U.S. retail food prices, less than 2.5%.
|Date of creation:||Jun 2013|
|Date of revision:|
|Contact details of provider:|| Postal: Justin S. Morrill Hall of Agriculture, 446 West Circle Dr., Rm 202, East Lansing, MI 48824-1039|
Phone: (517) 355-4563
Fax: (517) 432-1800
Web page: http://www.aec.msu.edu/agecon/
More information through EDIRC
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Ferris, John N., 2006. "Modeling the U.S. Domestic Livestock Feed Sector in a Period of Rapidly Expanding By-Product Feed Supplies from Ethanol Production," Staff Papers 11628, Michigan State University, Department of Agricultural, Food, and Resource Economics.
- Ferris, John N., 2011. "Potential for Corn Oil Extracted from Distillers’ Dried Grain and Solubles as a Feedstock for Biodiesel," Staff Papers 115632, Michigan State University, Department of Agricultural, Food, and Resource Economics.
- David Zilberman & Gal Hochman & Deepak Rajagopal & Steve Sexton & Govinda Timilsina, 2013. "The Impact of Biofuels on Commodity Food Prices: Assessment of Findings," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 95(2), pages 275-281.
- Trostle, Ronald, 2008. "Factors Contributing to Recent Increases in Food Commodity Prices (PowerPoint)," Seminars 43902, USDA Economists Group.
When requesting a correction, please mention this item's handle: RePEc:ags:midasp:150245. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (AgEcon Search)
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.