IDEAS home Printed from https://ideas.repec.org/p/mns/wpaper/wp201501.html
   My bibliography  Save this paper

The Ethanol Mandate and Corn Price Volatility

Author

Listed:
  • Peter Maniloff

    (Division of Economics and Business, Colorado School of Mines)

  • Sul-Ki Lee

    (Division of Economics and Business, Colorado School of Mines)

Abstract

Food price shocks can have substantial welfare implications, particularly in the world's low income regions. A number of previous studies has shown that the United States ethanol mandate has increased average corn price levels. We provide suggestive evidence that the mandate has also increased corn price volatility. Identification relies upon a series of falsification tests. Our results suggest that the ethanol mandate has increased the likelihood of very high price levels by even more than previously thought.

Suggested Citation

  • 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.
    • Handle: RePEc:mns:wpaper:wp201501
    as

    Download full text from publisher

    File URL: http://econbus-papers.mines.edu/working-papers/wp201501.pdf
    File Function: First version, 2015
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. 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.
    2. Regnier, Eva, 2007. "Oil and energy price volatility," Energy Economics, Elsevier, vol. 29(3), pages 405-427, May.
    3. Du, Xiaodong & Hayes, Dermot J., 2009. "The impact of ethanol production on US and regional gasoline markets," Energy Policy, Elsevier, vol. 37(8), pages 3227-3234, August.
    4. Jonathan E. Hughes & Christopher R. Knittel & Daniel Sperling, 2008. "Evidence of a Shift in the Short-Run Price Elasticity of Gasoline Demand," The Energy Journal, International Association for Energy Economics, vol. 29(1), pages 113-134.
    5. Vedenov, Dmitry V. & Duffield, James A. & Wetzstein, Michael E., 2006. "Entry of Alternative Fuels in a Volatile U.S. Gasoline Market," Journal of Agricultural and Resource Economics, Western Agricultural Economics Association, vol. 31(01), pages 1-13, April.
    6. Peter Maniloff, 2013. "Ethanol and Energy Security," Working Papers 2013-10, Colorado School of Mines, Division of Economics and Business.
    7. 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 2265-2295, October.
    8. Brian Wright, 2014. "Global Biofuels: Key to the Puzzle of Grain Market Behavior," Journal of Economic Perspectives, American Economic Association, vol. 28(1), pages 73-98, Winter.
    9. Searchinger, Timothy & Heimlich, Ralph & Houghton, R. A. & Dong, Fengxia & Elobeid, Amani & Fabiosa, Jacinto F. & Tokgoz, Simla & Hayes, Dermot J. & Yu, Hun-Hsiang, 2008. "Use of U.S. Croplands for Biofuels Increases Greenhouse Gases Through Emissions from Land-Use Change," Staff General Research Papers Archive 12881, Iowa State University, Department of Economics.
    10. Mitchell, Donald, 2008. "A note on rising food prices," Policy Research Working Paper Series 4682, The World Bank.
    11. Severin Borenstein, 2002. "The Trouble With Electricity Markets: Understanding California's Restructuring Disaster," Journal of Economic Perspectives, American Economic Association, vol. 16(1), pages 191-211, Winter.
    12. Park, Hwanil & Fortenbery, T. Randall, 2007. "The Effect of Ethanol Production on the U.S. National Corn Price," 2007 Conference, April 16-17, 2007, Chicago, Illinois 37565, NCCC-134 Conference on Applied Commodity Price Analysis, Forecasting, and Market Risk Management.
    13. Thomas W. Hertel & Jayson Beckman, 2011. "Commodity Price Volatility in the Biofuel Era: An Examination of the Linkage between Energy and Agricultural Markets," NBER Chapters, in: The Intended and Unintended Effects of US Agricultural and Biotechnology Policies, pages 189-221, National Bureau of Economic Research, Inc.
    14. repec:cdl:agrebk:qt11715438 is not listed on IDEAS
    15. Michael J. Roberts & Wolfram Schlenker, 2009. "World Supply and Demand of Food Commodity Calories," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 91(5), pages 1235-1242.
    16. Brian D. Wright, 2011. "The Economics of Grain Price Volatility," Applied Economic Perspectives and Policy, Agricultural and Applied Economics Association, vol. 33(1), pages 32-58.
    17. Charles Moss & Andrew Schmits, 2002. "Price behaviour in the US sweetener market: a cointegration approach," Applied Economics, Taylor & Francis Journals, vol. 34(10), pages 1273-1281.
    18. Marc F. Bellemare, 2015. "Rising Food Prices, Food Price Volatility, and Social Unrest," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 97(1), pages 1-21.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Markel, Evan & Sims, Charles & English, Burton C., 2018. "Policy uncertainty and the optimal investment decisions of second-generation biofuel producers," Energy Economics, Elsevier, vol. 76(C), pages 89-100.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Philip Abbott, 2014. "Biofuels, Binding Constraints, and Agricultural Commodity Price Volatility," NBER Chapters, in: The Economics of Food Price Volatility, pages 91-131, National Bureau of Economic Research, Inc.
    2. 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.
    3. Nicolas Legrand, 2023. "War in Ukraine: The rational “wait‐and‐see” mode of global food markets," Applied Economic Perspectives and Policy, John Wiley & Sons, vol. 45(2), pages 626-644, June.
    4. repec:cdl:agrebk:qt61t114zb is not listed on IDEAS
    5. Condon, Nicole & Klemick, Heather & Wolverton, Ann, 2015. "Impacts of ethanol policy on corn prices: A review and meta-analysis of recent evidence," Food Policy, Elsevier, vol. 51(C), pages 63-73.
    6. Valenti, Daniele & Bertoni, Danilo & Cavicchioli, Davide & Olper, Alessandro, "undated". "Understanding the role of supply and demand factors in the global wheat market: a Structural Vector Autoregressive approach," FEEM Working Papers 338780, Fondazione Eni Enrico Mattei (FEEM).
    7. Nicolas Legrand, 2019. "The Empirical Merit Of Structural Explanations Of Commodity Price Volatility: Review And Perspectives," Journal of Economic Surveys, Wiley Blackwell, vol. 33(2), pages 639-664, April.
    8. Peter Maniloff, 2013. "Ethanol and Energy Security," Working Papers 2013-10, Colorado School of Mines, Division of Economics and Business.
    9. repec:use:tkiwps:11 is not listed on IDEAS
    10. Mekbib G. Haile & Matthias Kalkuhl & Joachim Braun, 2014. "Inter- and intra-seasonal crop acreage response to international food prices and implications of volatility," Agricultural Economics, International Association of Agricultural Economists, vol. 45(6), pages 693-710, November.
    11. Palazzi, Rafael Baptista & Meira, Erick & Klotzle, Marcelo Cabus, 2022. "The sugar-ethanol-oil nexus in Brazil: Exploring the pass-through of international commodity prices to national fuel prices," Journal of Commodity Markets, Elsevier, vol. 28(C).
    12. Nakelse, Tebila & Dalton, Timothy J. & Hendricks, Nathan P. & Hodjo, Manzamasso, 2018. "Are smallholder farmers better or worse off from an increase in the international price of cereals?," Food Policy, Elsevier, vol. 79(C), pages 213-223.
    13. Helmut Herwartz & Alberto Saucedo, 2020. "Food–oil volatility spillovers and the impact of distinct biofuel policies on price uncertainties on feedstock markets," Agricultural Economics, International Association of Agricultural Economists, vol. 51(3), pages 387-402, May.
    14. Haile, Mekbib G. & Kalkuhl, Matthias & Braun, Joachim von, 2013. "How does food supply respond to high and volatile international food prices? An empirical evaluation of inter- and intra- seasonal global crop acreage response," 2013 Fourth International Conference, September 22-25, 2013, Hammamet, Tunisia 161472, African Association of Agricultural Economists (AAAE).
    15. Karel Janda & Ladislav Kristoufek, 2019. "The Relationship Between Fuel and Food Prices: Methods, Outcomes, and Lessons for Commodity Price Risk Management," CAMA Working Papers 2019-20, Centre for Applied Macroeconomic Analysis, Crawford School of Public Policy, The Australian National University.
    16. Brian Wright, 2014. "Global Biofuels: Key to the Puzzle of Grain Market Behavior," Journal of Economic Perspectives, American Economic Association, vol. 28(1), pages 73-98, Winter.
    17. Haile, Mekbib G. & Kalkuhl, Matthias & Braun, Joachim von, 2013. "Inter-and intra-annual global crop acreage response to prices and price risk," 2013 Annual Meeting, August 4-6, 2013, Washington, D.C. 149695, Agricultural and Applied Economics Association.
    18. Paulo Henrique Hoeckel & Augusto Mussi Alvim & José Pedro Pontes & João Dias, 2023. "The Ethanol Market and Its Relation to the Price of Agricultural Commodities," Energies, MDPI, vol. 16(6), pages 1-18, March.
    19. Condon, Nicole & Klemicj, Heather & Wolverton, Ann, 2013. "Impacts of Ethanol Policy on Corn Prices: A Review and Meta-Analysis of Recent Evidence," National Center for Environmental Economics-NCEE Working Papers 280915, United States Environmental Protection Agency (EPA).
    20. Lade, Gabriel E. & Lin, C.-Y. Cynthia & Smith, Aaron, 2015. "Ex Post Costs and Renewable Identification Number (RIN) Prices under the Renewable Fuel Standard," RFF Working Paper Series dp-15-22, Resources for the Future.
    21. Karel Janda & Ladislav Krištoufek, 2019. "The Relationship Between Fuel and Food Prices: Methods and Outcomes," Annual Review of Resource Economics, Annual Reviews, vol. 11(1), pages 195-216, October.
    22. Chen, Kuan-Ju & Chen, Kuan-Heng, 2016. "Analysis of Energy and Agricultural Commodity Markets with the Policy Mandated: A Vine Copula-based ARMA-EGARCH Model," 2016 Annual Meeting, July 31-August 2, Boston, Massachusetts 236028, Agricultural and Applied Economics Association.

    More about this item

    Keywords

    ;
    ;
    ;
    ;

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:mns:wpaper:wp201501. See general information about how to correct material in RePEc.

    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 CitEc recognized a bibliographic reference but did not link an item in RePEc 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 RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Jared Carbone (email available below). General contact details of provider: https://edirc.repec.org/data/decsmus.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.