Agricultural Development Economics Division, Food and Agriculture Organization of the United Nations
Julian Binfield and Wyatt Thompson
Food and Agricultural Policy Research Institute, University of Missouri, Columbia
The US Renewable Fuel Standard sets a lower bound on the amount of biofuels used, with consequences for behavior of agricultural commodity markets that currently supply the vast majority of feedstocks for biofuel production. In this article, maize biotechnology is considered taking into account the impacts of US biofuel mandates. The impact of a hypothetical technology that reduces the severity of negative maize yield shocks is estimated using a structural economic model simulated stochastically. The importance of mandated levels of use of biofuels depends on whether they are binding. If biofuel use exceeds mandated levels, then mandates have little impact. If mandates are binding, then the markets’ ability to respond to price movements can be reduced. In either case, aggregate maize demand is inelastic in these projections, so yield technology improvements can reduce total revenue to maize production.
Key words: Maize yields, biotechnology, biofuel mandates, RFS, ethanol, stochastic simulation.