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The Effect of Ethanol Production on the U.S. National Corn Price

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  • Fortenbery, T. Randall
  • Park, Hwanil

Abstract

A system of equations representing corn supply, feed demand, export demand, food, alcohol and industrial (FAI) demand, and corn price is estimated by three-stage least squares. A price dependent reduced form equation is then formed to investigate the effect of ethanol production on the national average corn price. The elasticity of corn price with respect to ethanol production is then obtained. Results suggest that ethanol production has a positive impact on the national corn price and that the demand from FAI has a greater impact on the corn price than other demand categories. Thus, significant growth in ethanol production is important in explaining corn price determination.

Suggested Citation

  • Fortenbery, T. Randall & Park, Hwanil, 2008. "The Effect of Ethanol Production on the U.S. National Corn Price," Staff Papers 92200, University of Wisconsin-Madison, Department of Agricultural and Applied Economics.
    • Handle: RePEc:ags:wisagr:92200
    DOI: 10.22004/ag.econ.92200
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    2. Anton Bekkerman & Thomas Gumbley & Gary W. Brester, 2021. "The Impacts of Biofuel Policies on Spatial and Vertical Price Relationships in the US Fertilizer Industry," Applied Economic Perspectives and Policy, John Wiley & Sons, vol. 43(2), pages 802-822, June.
    3. McPhail, Lihong Lu & Babcock, Bruce A., 2012. "Impact of US biofuel policy on US corn and gasoline price variability," Energy, Elsevier, vol. 37(1), pages 505-513.
    4. Deborah Bridges & Frank Tenkorang & Greg Nies, 2023. "The Effect Of Market Shocks On The Volatility Of Corn Price," Review of Economic and Business Studies, Alexandru Ioan Cuza University, Faculty of Economics and Business Administration, issue 31, pages 9-18, June.
    5. Seth Meyer, 2009. "Commentary," Regional Economic Development, Federal Reserve Bank of St. Louis, issue Apr, pages 74-77.
    6. Peter Maniloff & Sul-Ki Lee, 2015. "The Ethanol Mandate and Corn Price Volatility," Working Papers 2015-01, Colorado School of Mines, Division of Economics and Business.
    7. José César Cruz Junior & Daniel H D Capitani & Rodrigo L F Silveira, 2018. "The effect of Brazilian corn and soybean crop expansion on price and volatility transmission," Economics Bulletin, AccessEcon, vol. 38(4), pages 2273-2283.
    8. Frank, Julieta & Garcia, Philip, 2010. "How Strong are the Linkages among Agricultural, Oil, and Exchange Rate Markets?," 2010 Conference, April 19-20, 2010, St. Louis, Missouri 285312, NCR-134/ NCCC-134 Applied Commodity Price Analysis, Forecasting, and Market Risk Management.
    9. Arnade, Carlos & Hoffman, Linwood, 2016. "Maize Price Relationships in a Changing International Market: Have Brazil and/or Ukraine Crossed a Threshold?," 2017 Allied Social Sciences Association (ASSA) Annual Meeting, January 6-8, 2017, Chicago, Illinois 250116, Agricultural and Applied Economics Association.
    10. Katchova, Ani L., 2009. "The Spatial Effect of Ethanol Biorefinery Locations on Local Corn Prices," 2009 Annual Meeting, July 26-28, 2009, Milwaukee, Wisconsin 49309, Agricultural and Applied Economics Association.
    11. Jung, Jinho & Sesmero, Juan Pablo & Balagtas, Joseph V., "undated". "Market Power in Feedstock Procurement and Economic Effects of Corn Ethanol," 2017 Annual Meeting, July 30-August 1, Chicago, Illinois 258544, Agricultural and Applied Economics Association.
    12. Blanco, Luisa & Isenhouer, Michelle, 2010. "Powering America: The impact of ethanol production in the Corn Belt states," Energy Economics, Elsevier, vol. 32(6), pages 1228-1234, November.
    13. Bastiaensen, Johan & Marchetti, Peter, 2011. "Crisis in Nicaraguan microfinance: between the Scylla of business for profit and the Charybdis of clientelism," IOB Working Papers 2011.04, Universiteit Antwerpen, Institute of Development Policy (IOB).
    14. John D. Anderson & Keith H. Coble, 2010. "Impact of renewable fuels standard ethanol mandates on the corn market," Agribusiness, John Wiley & Sons, Ltd., vol. 26(1), pages 49-63.
    15. Dae-Heum Kwon & Jungho Baek & Won W. Koo, 2012. "A New Look at the Emergence of an Agro-Energy Nexus: A Graphical Causal Approach," Business and Economic Research, Macrothink Institute, vol. 2(2), pages 42-53, December.
    16. Andrian, Leandro Gaston, 2010. "Essays on energy economics: Microeconomic and macroeconomic dimensions," ISU General Staff Papers 201001010800002725, Iowa State University, Department of Economics.
    17. Leucci, A. C. & Ghinoi, S. & Sgargi, D. & Wesz, V. J., Jr., 2013. "Variation and links among food and energy international prices. An analysis through VAR models from 2000 to 2012," 2013 Second Congress, June 6-7, 2013, Parma, Italy 149923, Italian Association of Agricultural and Applied Economics (AIEAA).
    18. Behnke, Kathleen & Fortenbery, T. Randall, 2011. "The Impact of Ethanol Production on Local Corn Basis," 2011 Conference, April 18-19, 2011, St. Louis, Missouri 285346, NCR-134/ NCCC-134 Applied Commodity Price Analysis, Forecasting, and Market Risk Management.
    19. Zheng, Hualu & Muhammad, Andrew & Herndon, Cary W., Jr., 2009. "The Impacts of Ethanol on the US Catfish Farm Sector," 2009 Annual Meeting, January 31-February 3, 2009, Atlanta, Georgia 46248, Southern Agricultural Economics Association.

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