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Full-Text Articles in Social and Behavioral Sciences

Fuel Subsidy Pass-Through And Market Structure: Evidence From The Renewable Fuel Standard, Gabriel E. Lade, James Bushnell Dec 2016

Fuel Subsidy Pass-Through And Market Structure: Evidence From The Renewable Fuel Standard, Gabriel E. Lade, James Bushnell

CARD Working Papers

The Renewable Fuel Standard (RFS) is among the largest renewable energy mandates in the world. The policy is enforced using tradeable credits that implicitly subsidize biofuels and tax fossil fuels. The RFS relies on these taxes and subsidies to be passed through to consumers to stimulate demand for biofuels and decrease demand for gasoline and diesel. Using station-level prices for E85 (a high-ethanol blend fuel) from over 450 retail fuel stations, we show that pass-through of the ethanol subsidy is, on average, complete. However, we find that full pass-through takes four to six weeks and that local market structure of ...


Estimating Willingness To Pay For E85 In The United States, Kenneth Liao, Sébastien Pouliot, Bruce A. Babcock Nov 2016

Estimating Willingness To Pay For E85 In The United States, Kenneth Liao, Sébastien Pouliot, Bruce A. Babcock

CARD Working Papers

Meeting US ethanol blending mandates proposed by the Environmental Protection Agency will require a substantial number of motorists with flex-fuel vehicles to switch from low ethanol-gasoline blends to high ethanol-gasoline blends. The lower the willingness to pay for high-ethanol blends, the greater the cost of complying with the proposed mandates. Existing estimates of the willingness to pay for high-ethanol blends use data from Brazil (where consumers have knowledge of and experience with high-ethanol blends), data generated when retail prices greatly favored low-ethanol blends, or stated data collected from mail and online surveys. To obtain more accurate estimates of US willingness ...


Policy Shocks And Market-Based Regulations: Evidence From The Renewable Fuel Standard, Gabriel E. Lade, C.-Y. Cynthia Lin Lawell, Aaron Smith May 2016

Policy Shocks And Market-Based Regulations: Evidence From The Renewable Fuel Standard, Gabriel E. Lade, C.-Y. Cynthia Lin Lawell, Aaron Smith

CARD Working Papers

The Renewable Fuel Standard (RFS2) mandates large increases in U.S. biofuel consumption and is implemented using a market for tradable compliance credits, known as RINs. In early 2013, RIN prices soared, causing the regulator to propose reducing future mandates. We develop a dynamic model of RFS2 compliance to demonstrate how changes in expectations about future policy affect current compliance costs, and we use a market effciency test to demonstrate that RIN markets have behaved in accordance with our model. We then estimate empirically the effect of three “policy shocks” that reduced the expected mandates in 2013. The largest of ...


Research Needs And Challenges In The Few System: Coupling Economic Models With Agronomic, Hydrologic, And Bioenergy Models For Sustainable Food, Energy, And Water Systems, Catherine L. Kling, Raymond W. Arritt, Gray Calhoun, David A. Keiser, John M. Antle, Jeffery G. Arnold, Miguel Carriquiry, Indrajeet Chaubey, Peter Christensen, Baskar Ganapathysubramanian, Philip Gassman, William Gutowski, Thomas W. Hertel, Gerritt Hoogenboom, Elena Irwin, Madhu Khanna, Pierre Mérel, Daniel J. Phaneuf, Andrew Plantinga, Stephen Polasky, Paul Preckel, Sergey Rabotyagov, Ivan Rudik, Silvia Secchi, Aaron Smith, Andrew Vanloocke, Calvin Wolter, Jinhua Zhao, Wendong Zhang Mar 2016

Research Needs And Challenges In The Few System: Coupling Economic Models With Agronomic, Hydrologic, And Bioenergy Models For Sustainable Food, Energy, And Water Systems, Catherine L. Kling, Raymond W. Arritt, Gray Calhoun, David A. Keiser, John M. Antle, Jeffery G. Arnold, Miguel Carriquiry, Indrajeet Chaubey, Peter Christensen, Baskar Ganapathysubramanian, Philip Gassman, William Gutowski, Thomas W. Hertel, Gerritt Hoogenboom, Elena Irwin, Madhu Khanna, Pierre Mérel, Daniel J. Phaneuf, Andrew Plantinga, Stephen Polasky, Paul Preckel, Sergey Rabotyagov, Ivan Rudik, Silvia Secchi, Aaron Smith, Andrew Vanloocke, Calvin Wolter, Jinhua Zhao, Wendong Zhang

CARD Working Papers

On October 12–13, a workshop funded by the National Science Foundation was held at Iowa State University in Ames, Iowa with a goal of identifying research needs related to coupled economic and biophysical models within the FEW system. Approximately 80 people attended the workshop with about half representing the social sciences (primarily economics) and the rest from the physical and natural sciences. The focus and attendees were chosen so that findings would be particularly relevant to SBE research needs while taking into account the critical connectivity needed between social sciences and other disciplines.

We have identified several major gaps ...


Willingness To Pay For Ethanol In Motor Fuel: Evidence From Revealed And Stated Preference For E85, Kenneth Liao, Sebastien Pouliot Mar 2016

Willingness To Pay For Ethanol In Motor Fuel: Evidence From Revealed And Stated Preference For E85, Kenneth Liao, Sebastien Pouliot

CARD Working Papers

This paper estimates the relative preferences of motorists for E10 and E85 in different regions of the United States. We conducted an intercept survey of motorists with flex-fuel vehicles at E85 fuel stations in Iowa, Colorado, Oklahoma, Arkansas and California. The information collected includes prices observed at fuel stations, fuel choices by flex motorists, and responses to a series of opinion questions about ethanol and gasoline. We also proposed a hypothetical scenario to each motorist where either the price of the fuel selected was increased or the price of the fuel not selected was decreased. We estimate fuel preferences first ...


Mandates And The Incentive For Environmental Innovation, Matthew S. Clancy, Giancarlo Moschini Jun 2015

Mandates And The Incentive For Environmental Innovation, Matthew S. Clancy, Giancarlo Moschini

CARD Working Papers

Mandates are policy tools that are becoming increasingly popular to promote renewable energy use. In addition to mitigating the pollution externality of conventional energy, mandates have the potential to promote R&D investments in renewable energy technology. But how well do mandates perform as innovation incentives? To address this question, we develop a partial equilibrium model with endogenous innovation to examine the R&D incentives induced by a mandate, and compare this policy to two benchmark situations: laissez-faire and a carbon tax. Innovation is stochastic and the model permits an endogenous number of multiple innovators. We find that mandates can ...


The Impact Of An Eu-Us Transatlantic Trade And Investment Partnership Agreement On Biofuel And Feedstock Markets, John C. Beghin, Jean-Christophe Bureau, Alexandre Gohin Nov 2014

The Impact Of An Eu-Us Transatlantic Trade And Investment Partnership Agreement On Biofuel And Feedstock Markets, John C. Beghin, Jean-Christophe Bureau, Alexandre Gohin

CARD Working Papers

We assess the impact of a potential TTIP bilateral free trade agreement on the EU and US bio-economies (feedstock, biofuels, by-products, and related competing crops) and major trade partners in these markets. The analysis develops a multi-market model that incorporates bilateral trade flows (US to EU, EU to US, and similarly with third countries) and is calibrated to OECD-FAO baseline for 2013–2022 to account for recent policy decisions. The major policy reforms from a TTIP involve tariff and TRQ liberalization and their direct contractionary impact on US sugar supply, EU biofuel production, and indirect negative effect on US HFCS ...


Impact Of Ethanol Mandates On Fuel Prices When Ethanol And Gasoline Are Imperfect Substitutes, Sebastien Pouliot, Bruce A. Babcock Sep 2014

Impact Of Ethanol Mandates On Fuel Prices When Ethanol And Gasoline Are Imperfect Substitutes, Sebastien Pouliot, Bruce A. Babcock

CARD Working Papers

Past studies that examine the impact of ethanol mandates on fuel prices make the assumption that ethanol and gasoline are perfect substitutes because they are both sources of energy in transportation fuels. These studies, however, have been of limited use in informing current policy debates because the short- to medium-run reality is one of strong regulatory and infrastructure rigidities that restrict how ethanol can be consumed in the United States. Our objective here is to improve understanding of how these rigidities change the findings of existing studies. We accomplish this by estimating the impacts of higher ethanol mandates using a ...


Impact On Corn Prices From Reduced Biofuel Mandates, Bruce A. Babcock Nov 2013

Impact On Corn Prices From Reduced Biofuel Mandates, Bruce A. Babcock

CARD Working Papers

Press reports indicate that the Environmental Protection Agency may significantly reduce ethanol mandates to levels that can easily be met. To gain insight into what this decision implies about the price of corn we use a new model of the corn and RIN markets to project corn and ethanol prices and quantities through the 2019 marketing year under two ethanol mandate scenarios. The first scenario is the status quo where mandates that can be met with corn ethanol increase to 14.4 billion gallons in 2014 and 15 billion gallons in 2015 and thereafter. Mandates at this level can only ...


Second Response To Knittel And Smith, Dermot J. Hayes Sep 2012

Second Response To Knittel And Smith, Dermot J. Hayes

CARD Working Papers

Knittel and Smith present seven alternative versions of our model all of which apparently show a lower impact of ethanol production on gasoline prices. Four of these models are based on the flawed assumption that one can use the change in refiner’s margin and the change in gasoline prices interchangeably. The remaining three models all suffer from an obvious and endogeneity problem that when corrected results in results that are similar to ours. What is then left of their paper is a series of regressions of unrelated variables without appropriate controls, and with predictable results. I believe that the ...


Response To “Ethanol Production And Gasoline Prices: A Spurious Correlation” By Knittel And Smith, Dermot J. Hayes Aug 2012

Response To “Ethanol Production And Gasoline Prices: A Spurious Correlation” By Knittel And Smith, Dermot J. Hayes

CARD Working Papers

In a recent working paper, Christopher Knittel and Aaron Smith present an attack on a peer-reviewed paper “The Impact of Ethanol Production on US and Regional Gasoline Markets Relating Ethanol Production to Gasoline Prices" written by myself and Xiaodong Du, and published in 2009 in Energy Policy (Vol. 37 No.8), as well as two subsequent working papers in 2011 and 2012. Our work found that as ethanol production increased, the price of gasoline fell relative to the price of crude oil. Knittel and Smith claim to have refuted this result, and conclude that their “Empirical models that are most ...


The Impact Of Ethanol Production On U.S. And Regional Gasoline Markets: An Update To 2012, Xiaodong Du, Dermot J. Hayes May 2012

The Impact Of Ethanol Production On U.S. And Regional Gasoline Markets: An Update To 2012, Xiaodong Du, Dermot J. Hayes

CARD Working Papers

We update the findings of the impact of ethanol production on U.S. and regional gasoline markets as reported previously in Du and Hayes (2009 and 2011), by extending the data to December 2011. The results indicate that over the period of January 2000 to December 2011, the growth in ethanol production reduced wholesale gasoline prices by $0.29 per gallon on average across all regions. The Midwest region experienced the biggest negative impact of $0.45/gallon, while the regions of East Coast, West Coast, and Gulf Coast experienced negative impacts of similar magnitudes around $0.20/gallon. Based ...


Environmental Impacts Of Emerging Biomass Feedstock Markets: Energy, Agriculture, And The Farmer, Rebecca S. Dodder, Amani E. Elobeid, Timothy L. Johnson, P. Ozge Kaplan, Lyubov A. Kurkalova, Silvia Secchi, Simla Tokgoz Dec 2011

Environmental Impacts Of Emerging Biomass Feedstock Markets: Energy, Agriculture, And The Farmer, Rebecca S. Dodder, Amani E. Elobeid, Timothy L. Johnson, P. Ozge Kaplan, Lyubov A. Kurkalova, Silvia Secchi, Simla Tokgoz

CARD Working Papers

The tighter linkages between energy and crop markets due to recent climate and energy legislation in the US have large potential environmental impacts beyond carbon sequestration and climate mitigation. These range from effects on water quality and quantity, soil erosion, habitat and biodiversity preservation. These impacts are very location and management-decision specific, as they are the product of atomistic decisions and depend on soil and landscape specific variables. In order to fully understand the effects of biomass markets, the new and stronger linkages and feedback effects between national- and global-scale energy and commodity markets must be properly understood and identified ...


Greenhouse Gas And Nitrogen Fertilizer Scenarios For U.S. Agriculture And Global Biofuels, Amani E. Elobeid, Miguel Carriquiry, Jacinto F. Fabiosa, Kranti Mulik, Dermot J. Hayes, Bruce A. Babcock, Jerome R. F. Dumortier, Francisco Rosas Jun 2011

Greenhouse Gas And Nitrogen Fertilizer Scenarios For U.S. Agriculture And Global Biofuels, Amani E. Elobeid, Miguel Carriquiry, Jacinto F. Fabiosa, Kranti Mulik, Dermot J. Hayes, Bruce A. Babcock, Jerome R. F. Dumortier, Francisco Rosas

CARD Working Papers

This analysis uses the 2011 FAPRI-CARD (Food and Agricultural Policy Research Institute–Center for Agricultural and Rural Development) baseline to evaluate the impact of four alternative scenarios on U.S. and world agricultural markets, as well as on world fertilizer use and world agricultural greenhouse gas emissions. A key assumption in the 2011 baseline is that ethanol support policies disappear in 2012. The baseline also assumes that existing biofuel mandates remain in place and are binding. Two of the scenarios are adverse supply shocks, the first being a 10% increase in the price of nitrogen fertilizer in the United States ...


The Impact Of Ethanol Production On Us And Regional Gasoline Markets: An Update To May 2009, Xiaodong Du, Dermot J. Hayes Apr 2011

The Impact Of Ethanol Production On Us And Regional Gasoline Markets: An Update To May 2009, Xiaodong Du, Dermot J. Hayes

CARD Working Papers

This report updates the findings in Du and Hayes 2009 by extending the data to December 2010 and concludes that over the sample period from January 2000 to December 2010, the growth in ethanol production reduced wholesale gasoline prices by $0.25 per gallon on average. The Midwest region experienced the biggest impact, with a $0.39/gallon reduction, while the East Coast had the smallest impact at $0.16/gallon. Based on the data of 2010 only, the marginal impacts on gasoline prices are found to be substantially higher given the much higher ethanol production and crude oil prices ...


The Trade-Off Between Bioenergy And Emissions When Land Is Scarce, Nathan S. Kauffman, Dermot J. Hayes Jan 2011

The Trade-Off Between Bioenergy And Emissions When Land Is Scarce, Nathan S. Kauffman, Dermot J. Hayes

CARD Working Papers

Agricultural biofuels require the use of scarce land, and this land has opportunity cost. We explore the objective function of a social planner who includes a land constraint in the optimization decision to minimize environmental cost. The results show that emissions should be measured on a per acre basis. Conventional agricultural life cycle assessments for biofuels report carbon emissions on a per gallon basis, thereby ignoring the implications of land scarcity and implicitly assuming an infinite supply of the inputs needed for production. Switchgrass and corn are then modeled as competing alternatives to show how the inclusion of a land ...


How Market Efficiency And The Theory Of Storage Link Corn And Ethanol Markets, Mindy L. Mallory, Dermot J. Hayes, Scott Alan Irwin Dec 2010

How Market Efficiency And The Theory Of Storage Link Corn And Ethanol Markets, Mindy L. Mallory, Dermot J. Hayes, Scott Alan Irwin

CARD Working Papers

In this article we use the theories of market efficiency and supply of storage to develop a conceptual link between the corn and ethanol markets and explore statistical evidence for the link. We propose that a long-run no-profit condition is established in distant futures markets for ethanol, corn, and natural gas and then use the theory of storage to define an inter-temporal equilibrium among these prices. The relationship shows that under certain conditions, future price expectations will influence current spot prices and that a short-term relationship between input and output prices will exist. This short-term relationship will contain fixed costs ...


Investment In Cellulosic Biofuel Refineries: Do Renewable Identification Numbers Matter?, Ruiqing Miao, David A. Hennessy, Bruce A. Babcock Sep 2010

Investment In Cellulosic Biofuel Refineries: Do Renewable Identification Numbers Matter?, Ruiqing Miao, David A. Hennessy, Bruce A. Babcock

CARD Working Papers

A floor and trade policy in Renewable Identification Numbers (RINs) is the market mechanism by which U.S. biofuel consumption mandates are met. A conceptual model is developed to study the impact of RINs on stimulating investment in cellulosic biofuel refineries. In a two-period framework, we compare the first-period investment level (FIL) in three scenarios: (1) laissez-faire, (2) RINs under a nonwaivable mandate (NWM) policy, and (3) RINs under a waivable mandate (WM) policy. Results show that when firm-level marginal costs are constants, then RINs under WM policy do not stimulate FIL but they do increase the expected profit of ...


World Market Impacts Of High Biofuel Use In The European Union, Miguel Carriquiry, Fengxia Dong, Xiaodong Du, Amani E. Elobeid, Jacinto F. Fabiosa, Eddie Chavez, Suwen Pan Jul 2010

World Market Impacts Of High Biofuel Use In The European Union, Miguel Carriquiry, Fengxia Dong, Xiaodong Du, Amani E. Elobeid, Jacinto F. Fabiosa, Eddie Chavez, Suwen Pan

CARD Working Papers

This study examines the world market impact of an expansion in the biofuel sector in the European Union with particular focus on indirect land-use impacts. In the first scenario, an increase of 1 million tonnes oil equivalent (Mtoe) of wheat ethanol use in the European Union expands world land area used in agricultural commodity production by 366,000 hectares, representing an increase of 0.039% in total area. In the second scenario, an increase of 1 Mtoe of rapeseed oil biodiesel use in the European Union expands world land area by 352,000 hectares, representing an increase of 0.038 ...


Dynamics Of Biofuel Stock Prices: A Bayesian Approach, Xiaodong Du, Dermot J. Hayes, Cindy L. Yu Sep 2009

Dynamics Of Biofuel Stock Prices: A Bayesian Approach, Xiaodong Du, Dermot J. Hayes, Cindy L. Yu

CARD Working Papers

We use Bayesian Markov Chain Monte Carlo methods to investigate the linkage between the volatility of ethanol security prices and the uncertainty surrounding the profitability of ethanol production and the price variations of non-ethanol energy securities. The joint evolution of return and volatility is modeled as a stochastic process that incorporates jumps in both return and volatility. While a strong and significant correlation is found between the volatility of ethanol securities and profit uncertainty from June 2005 to July 2008, the dynamic pattern of ethanol stock volatility is strikingly similar to that of the S&P 500 energy sector index ...


The Impact Of Biofuels Policy On Agribusiness Stock Prices, Fatma Sine Tepe, Xiaodong Du, David A. Hennessy Sep 2009

The Impact Of Biofuels Policy On Agribusiness Stock Prices, Fatma Sine Tepe, Xiaodong Du, David A. Hennessy

CARD Working Papers

Corn markets are important for many industries, including the seed, fertilizer, meat production/processing and agricultural machinery sectors, all of which are highly concentrated. Oligopoly theory suggests that corn input and field equipment suppliers likely benefit from policies that support corn markets, such as U.S. biofuels policy, while meat companies are likely adversely affected. Employing a linear two-factor (S&P 500 and corn prices) equilibrium asset pricing model, this study investigates the impact of biofuels policy on U.S. agribusiness and food processing firm stock prices. Conditional heteroskedasticity in stock returns is accounted for using a GARCH(1,1 ...


Speculation And Volatility Spillover In The Crude Oil And Agricultural Commodity Markets: A Bayesian Analysis, Xiaodong Du, Cindy L. Yu, Dermot J. Hayes May 2009

Speculation And Volatility Spillover In The Crude Oil And Agricultural Commodity Markets: A Bayesian Analysis, Xiaodong Du, Cindy L. Yu, Dermot J. Hayes

CARD Working Papers

This paper assesses the roles of various factors influencing the volatility of crude oil prices and the possible linkage between this volatility and agricultural commodity markets. Stochastic volatility models are applied to weekly crude oil, corn, and wheat futures prices from November 1998 to January 2009. Model parameters are estimated using Bayesian Markov chain Monte Carlo methods. The main results are as follows. Speculation, scalping, and petroleum inventories are found to be important in explaining oil price variation. Several properties of crude oil price dynamics are established, including mean-reversion, a negative correlation between price and volatility, volatility clustering, and infrequent ...


Land-Use Credits To Corn Ethanol: Accounting For Distillers Dried Grains With Solubles As A Feed Substitute In Swine Rations, Jacinto F. Fabiosa Apr 2009

Land-Use Credits To Corn Ethanol: Accounting For Distillers Dried Grains With Solubles As A Feed Substitute In Swine Rations, Jacinto F. Fabiosa

CARD Working Papers

Many studies on the impact of biofuels on greenhouse gas emissions do not consider indirect land-use change and land use avoided because of co-products utilization. This paper provides estimates of the land-use credit for corn ethanol when its by-product—distillers dried grains with solubles (DDGS)—is used in swine feed rations to substitute for corn and soymeal. The range of estimates used here covers the land-use credit used in the literature. Moreover, this study departs from earlier studies because feed rations from a least-cost optimization are used rather than rations from feeding trials, and DDGS nutrient profile variability is fully ...


Land Allocation Effects Of The Global Ethanol Surge: Predictions From The International Fapri Model, Jacinto F. Fabiosa, John C. Beghin, Fengxia Dong, Amani E. Elobeid, Simla Tokgoz, Tun-Hsiang (Edward) Yu Mar 2009

Land Allocation Effects Of The Global Ethanol Surge: Predictions From The International Fapri Model, Jacinto F. Fabiosa, John C. Beghin, Fengxia Dong, Amani E. Elobeid, Simla Tokgoz, Tun-Hsiang (Edward) Yu

CARD Working Papers

We quantify the emergence of biofuel markets and its impact on U.S. and world agriculture for the coming decade using the multi-market, multi-commodity international FAPRI (Food and Agricultural Policy Research Institute) model. The model incorporates the trade-offs between biofuel, feed, and food production and consumption and international feedback effects of the emergence through world commodity prices and trade. We examine land allocation by type of crop, and pasture use for countries growing feedstock for ethanol (corn, sorghum, wheat, sugarcane, and other grains) and major crops competing with feedstock for land resources such as oilseeds. We shock the model with ...


Biofuels: Potential Production Capacity, Effects On Grain And Livestock Sectors, And Implications For Food Prices And Consumers, Dermot J. Hayes, Bruce A. Babcock, Jacinto F. Fabiosa, Simla Tokgoz, Amani E. Elobeid, Tun-Hsiang (Edward) Yu, Fengxia Dong, Chad E. Hart, Eddie Chavez, Suwen Pan, Miguel Carriquiry, Jerome R. F. Dumortier Mar 2009

Biofuels: Potential Production Capacity, Effects On Grain And Livestock Sectors, And Implications For Food Prices And Consumers, Dermot J. Hayes, Bruce A. Babcock, Jacinto F. Fabiosa, Simla Tokgoz, Amani E. Elobeid, Tun-Hsiang (Edward) Yu, Fengxia Dong, Chad E. Hart, Eddie Chavez, Suwen Pan, Miguel Carriquiry, Jerome R. F. Dumortier

CARD Working Papers

We examine four scenarios for the evolution of the biofuel sector using a partial equilibrium model of the world agricultural sector. The model includes the new Renewable Fuels Standard in the 2007 energy act, the two-way relationship between fossil energy and biofuel markets, and a new trend toward corn oil extraction in ethanol plants. At one extreme, one scenario eliminates all support to the biofuel sector when the energy price is low, while the other extreme assumes no distribution bottleneck in ethanol demand growth when the energy price is high. Of the remaining two scenarios, one considers a pure market ...


The Impact Of Energy Markets On The Eu Agricultural Sector, Simla Tokgoz Jan 2009

The Impact Of Energy Markets On The Eu Agricultural Sector, Simla Tokgoz

CARD Working Papers

The objective of this study is to analyze the impact of crude oil prices on the EU agricultural sector in an era when the biofuels sector is expanding because of policy initiatives and the desire to find alternative fuel sources. To this end, first a baseline is set up for the EU ethanol, grain, and dried distillers grains markets. In the next step, two different scenarios are run. The first scenario incorporates a 10-Euros-per-barrel increase in the EU crude oil price with the ethanol import tariffs in place. The second scenario incorporates the same shock with the ethanol import tariffs ...


Welfare Changes From The U.S. Ethanol Tax Credit: The Role Of Uncertainty And Interlinked Commodity Markets, Mindy L. Baker Dec 2008

Welfare Changes From The U.S. Ethanol Tax Credit: The Role Of Uncertainty And Interlinked Commodity Markets, Mindy L. Baker

CARD Working Papers

A model of the corn, soybean, and wheat markets calculates welfare effects of the U.S. ethanol tax credit. Crop yields are uncertain, and demand consists of feed, food, energy, and exports. Modeling uncertainty in crop yields allows the valuation of deficiency payments as options. Disaggregating demand records who benefits from the tax credit and by how much; incorporating linked crop markets captures indirect effects important for determining the transfer from consumers to producers. There is $600 million in net welfare loss, increased taxpayer liability, and a large transfer from consumers to farmers. A brief comparison of recent literature is ...


Not All Ddgs Are Created Equal: Nutrient-Profile-Based Pricing To Incentivize Quality, Jacinto F. Fabiosa Nov 2008

Not All Ddgs Are Created Equal: Nutrient-Profile-Based Pricing To Incentivize Quality, Jacinto F. Fabiosa

CARD Working Papers

This study finds that distillers dried grains with solubles (DDGS) is a dominant feed ingredient in hog finishing rations, despite variability in the product's nutritional content. The optimal inclusion rate has remained at the maximum allowable limit of 20%, suggesting that when a particular DDGS product has low nutrient content, feed compounders simply supplement with corn and soymeal, whatever deficits in nutrients are created as a result.

The study examines DDGS products from 40 different ethanol plants and finds that, relative to the DDGS product with the lowest feed ration cost, the optimal feed ration costs of DDGS products ...


A Welfare Analysis Of The U.S. Ethanol Subsidy, Xiaodong Du, Dermot J. Hayes, Mindy L. Baker Nov 2008

A Welfare Analysis Of The U.S. Ethanol Subsidy, Xiaodong Du, Dermot J. Hayes, Mindy L. Baker

CARD Working Papers

Based on a transparent analytical model of multiple markets including corn, ethanol, gasoline, and transportation fuel, this study estimates the welfare changes for consumers and producers resulting from ethanol production and related support polices in 2007. The welfare estimation takes into account the second-best gain from eliminating loan deficiency payments. The results suggest the total social cost is about $0.78 billion for given market parameters. We validate the model's underlying assumption and test for the results' sensitivity to assumed parameters.


Does A Rising Biofuels Tide Raise All Boats? A Study Of Cash Rent Determinants For Iowa Farmland Under Hay And Pasture, Xiaodong Du, David A. Hennessy, William M. Edwards Oct 2008

Does A Rising Biofuels Tide Raise All Boats? A Study Of Cash Rent Determinants For Iowa Farmland Under Hay And Pasture, Xiaodong Du, David A. Hennessy, William M. Edwards

CARD Working Papers

Iowa's farmland consists of over 16% hay crops and pastureland, a significant portion of which is under cash rental contracts. This study investigates the comparative relationships between cash rental rates for cropped land and non-cropped land, where the latter includes hay and pastureland. We find that higher crop prices resulting from biofuel demand induces land use conversion from non-cropped land to crop production and thus bids up non-cropped land rents. Compared with changes in cropped land cash rents, non-cropped farmland rents could increase by a higher percentage. Non-cropped land cash rental rates are largely determined by crop and feeder ...