Modeling the US Corn Market During the Ethanol Boom

Authors

Bethany Vittetoe, Knox College

Abstract

Using the fact that ethanol first accounted for more than 10% of total corn use and ethanol production surpassed 2 billion gallons annually in 2002, I assert that an ethanol boom began in the United States in 2002. This paper uses both Two Stage Least Squares and Autoregressive time-series models to estimate the corn market in the US during the period of 1980-2007. I find that the ethanol boom caused US corn production in 2007 to be about 3 billion bushels (23%) higher than it would be in the absence of the ethanol industry. The model also suggests that ethanol is not crowding out other uses of corn; however, it may be crowding out production of soybeans and other crops competing with corn for acreage. It is likely that the ethanol industry is partially responsible for the recent increase in food prices around the world.

Recommended Citation

Vittetoe, Bethany (2009) "Modeling the US Corn Market During the Ethanol Boom," Undergraduate Economic Review: Vol. 5: Iss. 1, Article 1.
Available at: https://digitalcommons.iwu.edu/uer/vol5/iss1/1