Price Impacts

The production of biofuels not only would drive major changes in land use, but would also have significant impacts upon agricultural commodity prices (Table 8). The prices of the major crops are shown by selected years for the baseline (USDAext), the ETH60 scenario, for allowing corn grain ethanol production to decline (ETH60CA), and for the scenario with the additional delay in the commercial availability of cellulose-to-ethanol conversion technology (ETH60CACD).

For the ETH60 scenario, the price estimates indicate that all corn, wheat, and soybeans experience a significant price impact during the period. In the case of corn, by the year 2030 prices are at $3.03 per bushel, more than 60 cents above the baseline. Consistent with the behavior of the feedstock utilization, at the peak of corn grain utilization for ethanol, the price for corn also peaks to levels exceeding $3.00 per bushel. This same pattern follows for the other crops, which also peak about the same time that corn does and then tend to decrease as cellulose-to-ethanol becomes available.

For the next scenario (ETH60CA), which allows the demand for corn grain ethanol to diminish as cellulose comes into the mix in 2012, prices of corn and soybeans show a more significant decrease relative to wheat prices. The reduction in the use of corn for ethanol causes less pressure on corn prices and releases land for the production of soybeans which causes the soybean price to decline.

The third scenario, ETH60CACD, provides sensitivity to what might happen if a delay in the introduction of cellulose-to-ethanol technology occurs. The price increase, by 2015, represents the impact of the surge in biofuels demand on the current conversion technology. The price deflation following the 2015 peak is an indication of the size of the downward adjustment that may come into place as cellulose-to-ethanol becomes available.

It is important to mention than under the three scenarios considered, except for the baseline, the variable costs at the farm gate for dedicated energy crops remain between $21.60 and $30.00. The sensitivity of the changes analyzed is much more disruptive for the traditional crops prices than energy dedicated crops prices.

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