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Jake Ferris Professor Emeritus Department of Agricultural Economics Michigan State University

AN ECONOMETRIC ANALYSIS OF THE IMPACT OF THE EXPANSION IN THE U.S. PRODUCTION OF ETHANOL FROM CORN AND BIODIESEL FROM SOYBEANS ON MAJOR AGRICULTURAL VARIABLES, 2005 TO 2015. Jake Ferris Professor Emeritus Department of Agricultural Economics Michigan State University.

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Jake Ferris Professor Emeritus Department of Agricultural Economics Michigan State University

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  1. AN ECONOMETRIC ANALYSIS OF THE IMPACT OF THE EXPANSION IN THE U.S. PRODUCTION OF ETHANOL FROM CORNAND BIODIESEL FROM SOYBEANSON MAJOR AGRICULTURAL VARIABLES, 2005 TO 2015 Jake Ferris Professor Emeritus Department of Agricultural Economics Michigan State University

  2. Federal and state energy and environmental policies to encourage renewable fuels are designed to: • Improve air and water quality • Reduce U.S. dependence on foreign oil • Promote economic growth in rural areas • Shore up farm prices and incomes • Save expenditures on farm programs

  3. Baseline and Scenario Projections on Ethanol

  4. Distribution of U.S. Output of Vegetable Oils and Animal Fats

  5. Prices on Soybean Oil, Corn Oiland Yellow Grease

  6. Baseline and Scenario Projections on Biodiesel

  7. Baseline and Scenario Projectionson Ethanol and Biodiesel Combined

  8. Econometric U.S. Agriculture International Sector Commodity Oriented Core Model 538 equations 732 variables Gauss-Seidel Solution Satellite Models Assumptions USDA Baseline 2002 Farm Bill Normal Weather 2006-15 Projections Ethanol Biodiesel Both AGMOD

  9. Ethanol: Percent Change in the Scenario over the Baseline, 2006 to 2015

  10. Biodiesel: Percent Change in the Scenario over the Baseline, 2006 to 2015

  11. Renewables: Percent Change in the Scenario over the Baseline, 2006 to 2015

  12. Caveat on Price Projections • Impact of low world grain supplies • Future demand for animal protein from “low-carb diets”

  13. World Ending Stocks of Coarse Grain and Wheatas a Percent of Annual Utilization

  14. Caveat on Price Projections • Impact of low world grain supplies • Future demand for animal protein from “low-carb diets”

  15. Conclusions • U.S. agriculture can accommodate expansion in production of renewable fuels. • Higher prices in the feed grain and soybean sectors will have minimal long run effects on the livestock industries and retail food prices. • Renewable fuels programs will help ensure an economically viable agriculture and reduce federal farm program costs.

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