The Economic Impact of Ethanol Production on Arkansas Corn-Based Livestock Feed Prices

This study evaluates the impact of corn used in ethenol production on livestock feed prices. Using graphical, correlation, and causality analyses and 3-month lead and lagged price series, the study forms and tests three main hypotheses: corn-based livestock feed prices are affected by crude oil prices; corn-based livestock feed prices are affected by ethanol prices; corn-based livestock feed prices are affected by beef prices. The graphical analyses show close relationships in the trend of corn-based livestock feed prices and crude oil, ethanol and beef prices. The results of the correlation analyses indicate highly significant positive coefficients at lag zero for all pairs of price series, suggesting an instantaneous relationship could be attributed to the high use of crude oil in tje production of corn as well as to the use of corn in the production of ethanol and livestock feed. The results of the causality analuses indicate strong bidirectioal causality relationships between the prices of ethanol, beef, and livestock feed. However, there is a weak causality relationship between crude oil prices and livestock feed prices. These results imply that higher crude oil prices in recent years have created higher incentives for the demand for and production of ethanol, thus stimulating demand for corn, the primary input or feedstock for ethanol. This has put upward pressure on corn-based livestock feed prices.

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Journal of Food Distribution Research, 42, 1
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 Record created 2017-04-01, last modified 2020-10-28

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