IDEAS home Printed from
MyIDEAS: Log in (now much improved!) to save this paper

An Economic Analysis of Corn-based Ethanol Production

Listed author(s):
  • Koo, Won W.
  • Taylor, Richard D.
Registered author(s):

    A global multi-commodity simulation model was developed to estimate the impact of changes in ethanol production on the U.S. corn industry. Increased ethanol production under the Energy Acts of 2005 and 2007 resulted in a significant increase in the price of corn. However, for corn-based ethanol production, the break-even price of corn is approximately $4.52 per bushel with a federal subsidy of $0.51 per gallon of pure ethanol and $2.50 gasoline. With a corn price of $4.52, the economically desirable ethanol production is approximately 11 billion gallons. In order to produce 15 billion gallons of corn-based ethanol and to maintain the price of corn at $4.52 per bushel, supply of corn in the U.S. should be increased substantially through increases in corn yield rather than increases in corn acres. The increased price of corn leads to major structural changes in the corn industry in the United States as well as other corn producing and consuming countries. Corn production would increase in response to higher price levels, corn used for livestock feed may decrease, and U.S. exports decrease due mainly to a surge in corn used for ethanol production. This decrease in U.S. exports should be met by additional production in other countries. The increased price of corn also leads to increases in the prices of soybeans, wheat, high fructose corn syrup (HFCS), and agricultural inputs, such as land value and cash rent, fertilizer and chemicals, and farm equipment. In addition, the current price of corn has resulted in an increase in the production cost of livestock. The increase in prices of agricultural commodities and inputs would cause increases in retail prices of food in the U.S.

    If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

    File URL:
    Download Restriction: no

    Paper provided by North Dakota State University, Department of Agribusiness and Applied Economics in its series Agribusiness & Applied Economics Report with number 6201.

    in new window

    Date of creation: 2008
    Handle: RePEc:ags:nddaae:6201
    Contact details of provider: Postal:
    PO Box 5636, Fargo, ND 58105-5636

    Phone: (701) 231-7441
    Web page:

    More information through EDIRC

    No references listed on IDEAS
    You can help add them by filling out this form.

    This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

    When requesting a correction, please mention this item's handle: RePEc:ags:nddaae:6201. 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.

    This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.