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Emerging Biofuels: Outlook of Effects on US Grain, Oilseed, and Livestock Markets

A study by Iowa State University's Center for Agriculture and Rural Development has been published. Emerging Biofuels: Outlook of Effects on US Grain, Oilseed, and Livestock Markets argues that greater US ethanol production will mean more competition for land and grain, and will subsequently cause long-run crop price increases.
A study by Iowa State University's Center for Agriculture and Rural Development has been published. Emerging Biofuels: Outlook of Effects on US Grain, Oilseed, and Livestock Markets argues that greater US ethanol production will mean more competition for land and grain, and will subsequently cause long-run crop price increases. It says that the expanding US ethanol market has already driven US retail food prices up by $14 billion over the last year. In response to higher feed costs, livestock farmgate prices and therefore retail prices for meat, eggs and dairy will also increase. The magnitude of US ethanol market will depend on the price of oil - which is unlikely to decrease much from current levels - and the future makeup of the US automobile fleet. If Americans show sufficient demand for E-85 (a fuel that typically contains a mixture of up to 85 percent ethanol and 15 percent gasoline), corn-based ethanol production will increase to over 30 bn gallons per year, claims the study. This would cause the US corn acreage to increase to more than 110m acres, largely at the expense of soybean and wheat acres. Equilibrium corn prices would then rise to more than $4.40 per bushel. The direct effect of higher feed costs would be to push up beef, pork and poultry prices by more than 4 percent, and to to increase egg prices by 8 percent. The study also says that corn will remain the primary raw material for biofuels in the Corn Belt, ahead of cellulosic ethanol from switchgrass and biodiesel from soybeans, because these crops are less economically viable, says the study.
 

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