Study: Ethanol Mandate Creates 10% Chance of Corn Price Spike

April 11, 2010 07:00 PM
 

Source: American Meat Institute

If the U.S. corn industry experiences a weather-induced shortfall that typically has a 10% chance of happening in any given year, the price of a bushel of corn could rise to more than $7, and the impact of this price spike would be felt throughout the agriculture sector, according to a new study by the University of Illinois.

With biofuel mandates left in place, the burden for adjustment would fall primarily on the domestic livestock sector, resulting in financial losses for livestock producers, and eventually in reduced meat supplies and higher retail prices, the report states.

The researchers suggest implementing more flexibility into current renewable biofuels policies, including a relaxation of the annual renewable fuels mandate during an "emergency” situation. In addition, a reduction in the tax incentive for blenders should considered, as well as a lowering of the tariff on imported biofuels, researchers claim. And even that might not be enough.

"In extreme circumstances, the removal of the biofuels mandate, tax incentive and import tariff might be insufficient to limit ethanol production since the economics of blending would remain favorable. In such cases a cap on ethanol production, exports, or both might have to be considered,” the report concludes.

To view this report in its entirety, click here: http://www.meatami.com/ht/a/GetDocumentAction/i/58473


Back to news


 

Comments

 
Spell Check

No comments have been posted to this News Article

Close