AN ECONOMETRIC ANALYSIS OF THE IMPACT OF THE EXPANSION IN THE U'S' PRODUCTION OF ETHANOL FROM CORN A

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AN ECONOMETRIC ANALYSIS OF THE IMPACT OF THE
EXPANSION IN THE U.S. PRODUCTION OF ETHANOL FROM
CORNAND BIODIESEL FROM SOYBEANSON MAJOR
AGRICULTURAL VARIABLES, 2005 TO 2015

• Jake Ferris
• Professor Emeritus
• Department of Agricultural Economics
• Michigan State University

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Federal and state energy and environmental
policies to encourage renewable fuels are
designed to

• Improve air and water quality
• Reduce U.S. dependence on foreign oil
• Promote economic growth in rural areas
• Shore up farm prices and incomes
• Save expenditures on farm programs

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Baseline and Scenario Projections on Ethanol
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Distribution of U.S. Output of Vegetable Oils
and Animal Fats
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Prices on Soybean Oil, Corn Oiland Yellow Grease
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Baseline and Scenario Projections on Biodiesel
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Baseline and Scenario Projectionson Ethanol and
Biodiesel Combined
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AGMOD

• Econometric
• U.S. Agriculture
• International Sector
• Commodity Oriented
• Core Model
• 538 equations
• 732 variables
• Gauss-Seidel Solution
• Satellite Models

• Assumptions
• USDA Baseline
• 2002 Farm Bill
• Normal Weather
• 2006-15 Projections
• Ethanol
• Biodiesel
• Both

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Ethanol Percent Change in the Scenario over the
Baseline, 2006 to 2015
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Biodiesel Percent Change in the Scenario over
the Baseline, 2006 to 2015
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Renewables Percent Change in the Scenario over
the Baseline, 2006 to 2015
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Caveat on Price Projections

• Impact of low world grain supplies
• Future demand for animal protein from low-carb
  diets

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World Ending Stocks of Coarse Grain and Wheatas
a Percent of Annual Utilization
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Caveat on Price Projections

• Impact of low world grain supplies
• Future demand for animal protein from low-carb
  diets

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Conclusions

• U.S. agriculture can accommodate expansion in
  production of renewable fuels.
• Higher prices in the feed grain and soybean
  sectors will have minimal long run effects on the
  livestock industries and retail food prices.
• Renewable fuels programs will help ensure an
  economically viable agriculture and reduce
  federal farm program costs.