UW-Madison UW-Madison

Staff Paper No. 523 - Abstract

The Effect of Ethanol Production on the U.S. National Corn Price

T. Randall Fortenbery [trforten@wisc.edu]
Hwanil Park [hipark@wisc.edu]

Staff Paper No. 523, April 2008, 31p.


A system of equations representing corn supply, feed demand, export demand, food, alcohol and industrial (FAI) demand, and corn price is estimated by three-stage least squares. A price dependent reduced form equation is then formed to investigate the effect of ethanol production on the national average corn price. The elasticity of corn price with respect to ethanol production is then obtained. Results suggest that ethanol production has a positive impact on the national corn price and that the demand from FAI has a greater impact on the corn price than other demand categories. Thus, significant growth in ethanol production is important in explaining corn price determination.
Last updated on Wed, Apr 23, 2008 4:07pm