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The Cost to Mexico of U.S. Corn Ethanol Expansion

  • Timothy A. Wise
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    More than 40% of U.S. corn is now consumed in the production of ethanol. With the United States by far the world’s largest producer and exporter of corn, this represents an estimated 15% of global corn production. A recent survey by the National Academy of Sciences estimated that globally biofuels expansion accounted for 20-40% of the price increases seen in 2007-8, when prices of many food crops doubled. This had a dramatic impact on poor consumers and on net-food-importing developing countries. Expanding U.S. production and consumption of corn-based ethanol, which has been encouraged by a range of U.S. government subsidies and incentives, is considered one of the most important biofuel programs in putting upward pressure on food prices. Mexico now imports about one-third of its corn from the United States. Using conservative estimates from a study on U.S. ethanol expansion and corn prices, we estimate the direct impacts of U.S. ethanol expansion on Mexican corn import costs. We find that from 2006-2011, U.S. ethanol expansion cost Mexico about $1.5 billion due to ethanol-related corn price increases. Other methodologies suggest the costs could be more than twice as high, surpassing $3 billion over the period.

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    Paper provided by GDAE, Tufts University in its series GDAE Working Papers with number 12-01.

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    Date of creation: May 2012
    Date of revision:
    Handle: RePEc:dae:daepap:12-01
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    1. Michael J. Roberts & Wolfram Schlenker, 2013. "Identifying Supply and Demand Elasticities of Agricultural Commodities: Implications for the US Ethanol Mandate," American Economic Review, American Economic Association, vol. 103(6), pages 2265-95, October.
    2. Bruce A. Babcock, 2012. "The impact of US biofuel policies on agricultural price levels and volatility," China Agricultural Economic Review, Emerald Group Publishing, vol. 4(4), pages 407-426, November.
    3. Gal Hochman & Deepak Rajagopal & David Zilberman, 2010. "Are Biofuels the Culprit? OPEC, Food, and Fuel," American Economic Review, American Economic Association, vol. 100(2), pages 183-87, May.
    4. 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.
    5. Timothy A. Wise, . "09-08 "Agricultural Dumping Under NAFTA: Estimating the Costs of U.S. Agricultural Policies to Mexican Producers"," GDAE Working Papers 09-08, GDAE, Tufts University.
    6. Nelson, J.A., 2013. "Ethics and the economist: What climate change demands of us," Ecological Economics, Elsevier, vol. 85(C), pages 145-154.
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