The impacts of increasing ethanol production in the United States can be seen as increased corn prices dramatically change the relative profitability of agricultural crops across the U.S. This change has the potential of altering acreage allocations. A recent study analyzing the potential impacts of expanded ethanol production on southern agriculture shows that while changes in acreage tend to be somewhat unresponsive to changes in relative price, acreage changes are significant nonetheless. For example, with a 1% increase in the price of corn relative to the price of cotton, we would expect to only see a 0.35% decline in cotton acreage. However, under the more recent 50%+ increase in corn prices, we would expect to see about a 20% decline in cotton acreage. The study highlights the substantial impact that biofuels policy is having across the cotton belt and demonstrates the need for research on the impacts of biofuels policy on the infrastructure that supports cotton and other crops produced in the southern United States.
This study was an invited paper at the 2008 Southern Agricultural Economics Association annual meetings. The study was authored by Dwi Susanto, Post-Doctoral Associate; Parr Rosson, Professor and Director of the Center for North American Studies, Texas A&M University; and Darren Hudson, Professor, Agricultural Competitiveness Chair and Director of the Cotton Economics Research Institute, Texas Tech University.
For more information about this study and topic please visit the Cotton Economics Research Institute website.
The Cotton Economics Research Institute (CERI) coordinates economic research activities on all aspects of cotton research (e.g. production, marketing, trade, processing, value added) within Texas Tech University and other research units throughout the United States and other countries. The Institute fosters the dissemination of research results in both disciplinary/professional outlets and industry/public outlets focusing on economic research and coordinates with other research efforts, both economic and non-economic in their primary intent.