The residual dried distiller’s grains with solubles (DDGS) are sold and go back into the animal feed market—the destination of most of the field-corn crop in the first place.Further, these advocates claim that the starch diverted to ethanol production is of relatively little value given the large amounts of starch already going into the feed market. Two facts argue against these claims.
However, the cost of hard-boiled eggs, which require the shell, would rise dramatically.
Thus, boiled-egg consumers would pay per dozen, while scrambled-egg consumers might still be able to eat theirs for per dozen.
Nor have we calculated the impact of expanded corn production on reducing the acreage of other farm commodities and the subsequent price increases for those commodities.
Using three scenarios, Bruce Babcock at Iowa State University has simulated market interactions for farm commodities and fuel. In the first scenario, actual production meets the ethanol mandate.
First, the value of the residual DDGS is less than one-third of the value of the corn used for ethanol production. In other words, ethanol production uses more than two-thirds of the economic value of the corn.
It might be argued that the one-third residual is all that the corn would have been worth in the first place.In the second, the available flexibility to carry over accumulated renewable credits and/or to borrow renewable credits from future years significantly moderates the price impact of the ethanol mandate in a given year. Babcock estimates that waiving the mandate would moderate corn prices by 8.0 percent to 34.4 percent.The lower value assumes that blenders (oil refiners that are obligated to blend the mandated volumes of ethanol into their gasoline) take full advantage of current provisions to carry over renewable credits.The widespread drought in the Corn Belt has dimmed expectations of a record harvest as predicted earlier this year. The RFS sets a floor on the volume of ethanol that must be included in the U. Hypothetically, the government could impose a similarly misguided renewable cement policy mandating that a minimum fraction of cement be made with eggshells instead of mineral sources of calcium carbonate.Even mandating a very small fraction could significantly increase the demand for eggs.These two facts show that the starch is important for non-ethanol uses and that ethanol producers compete against the other users, driving up the price of corn by an estimated two-thirds. Thus, the equivalent diversion of corn value to ethanol production is 27 percent of the U. market or, more important, 10.8 percent of the world corn market.