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Impact of renewable fuels standard ethanol mandates on the corn market
Author(s) -
Anderson John D.,
Coble Keith H.
Publication year - 2010
Publication title -
agribusiness
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.57
H-Index - 43
eISSN - 1520-6297
pISSN - 0742-4477
DOI - 10.1002/agr.20202
Subject(s) - corn ethanol , mandate , economics , gasoline , renewable fuels , supply and demand , renewable energy , biofuel , agricultural economics , ethanol , renewable resource , diesel fuel , ethanol fuel , natural resource economics , microeconomics , chemistry , waste management , engineering , electrical engineering , organic chemistry , political science , law
Since 2002, the Renewable Fuels Standard has established mandated levels of ethanol blending in gasoline. Mandated ethanol use represents an important component of ethanol demand. Thus, the ethanol mandates influence derived demand for corn. This work investigates the potential impact of ethanol mandates on equilibrium corn prices and quantities, focusing on how the mandates influence market participant expectations. Results illustrate that due to the stochastic nature of supply and demand shocks, even a mandate that is technically nonbinding can have a substantial impact on corn prices and quantities through the mandate's impact on the price‐responsiveness of demand from the ethanol sector. [JEL classifications: Q13, Q42, Q48]. © 2010 Wiley Periodicals, Inc.