The False Dilemma of “Food or Fuel” The Effects of Ethanol Production on Crop Prices and Agricultural Land Use

Abstract

Existing studies on corn ethanol allege that US government policies encouraging its production have lead to higher food prices and an expansion of land used for corn production, raising concerns that the impoverished will lose access to food and that ethanol cannot effectively offset greenhouse gas emissions from fossil fuels. In this paper I use data from the US Department of Agriculture to attempt to determine whether any meaningful relationship can be established between historical ethanol production and crop prices or agricultural land use. I find that, while a correlation does exist between ethanol production and crop prices, this correlation is better explained by accompanying changes in oil prices. I also find that increased ethanol production has not been associated with an increase in the amount of land used for agriculture in the United States. I conclude that while no significant correlation can be established between past and present levels of ethanol production and crop prices or land use, future expansions of ethanol production may still affect these variables. Future policies should therefore be cautious about expanding ethanol production beyond what current US agricultural production capacity can support.