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Politics : Rat's Nest - Chronicles of Collapse -- Ignore unavailable to you. Want to Upgrade?

To: Wharf Rat who wrote (5117)	11/19/2006 11:12:18 AM
From: Wharf Rat	Read Replies (1) \| Respond to of 24232

The Iowa agricultural economist's projection of the impact of the diversion of corn to ethanol production is on-line as a pdf: The Long-Run Impact of Corn-Based Ethanol on the Grain, Oilseed, and Livestock Sectors: A Preliminary Assessment Amani Elobeid, Simla Tokgoz, Dermot J. Hayes, Bruce A. Babcock, and Chad E. Hart CARD Briefing Paper 06-BP 49 November 2006 Center for Agricultural and Rural Development, Iowa State University The ongoing growth of corn-based ethanol production raises some fundamental questions about what impact continued growth will have on U.S. and world agriculture. Estimates of the long-run potential for ethanol production can be made by calculating the corn price at which the incentive to expand ethanol production disappears. Under current ethanol tax policy, if the prices of crude oil, natural gas, and distillers grains stay at current levels, then the break-even corn price is $4.05 per bushel. A multi-commodity, multicountry system of integrated commodity models is used to estimate the impacts if we ever get to $4.05 corn. At this price, corn-based ethanol production would reach 31.5 billion gallons per year, or about 20% of projected U.S. fuel consumption in 2015. Supporting this level of production would require 95.6 million acres of corn to be planted. Total corn production would be approximately 15.6 billion bushels, compared to 11.0 billion bushels today. Most of the additional corn acres come from reduced soybean acreage. Wheat markets would adjust to fulfill increased demand for feed wheat. Corn exports and production of pork and poultry would all be reduced in response to higher corn prices and increased utilization of corn by ethanol plants. These results should not be viewed as a prediction of what will eventually materialize. Rather, they indicate a logical end point to the current incentives to invest in corn-based ethanol plants. Food or fuel? As long as the U.S. is exporting some corn, U.S. prices will equal the world corn price minus transportations costs. This means that as U.S. corn prices rise, world corn prices will also increase. U.S. livestock producers will experience higher feed costs and this will cause some to exit the industry. This reduced production will cause an increase in market prices, and domestic and international consumers will pay higher prices for U.S. livestock products. The impact on pork and poultry producers will be most severe because these sectors are least able to switch from corn-based diets to DDGS-based diets. Effect of tax policy on market signals: The results are most sensitive to the price of crude oil and to the tax credit that is provided to ethanol blenders. The results are not particularly sensitive to the import tariff alone, the release of Conservation Reserve Program acres, or to the prices of DDGS and natural gas. card.iastate.edu