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Abstract

There is evidence that the use of corn as a biofuels feedstock has increased the crude oil pass-through to the corn price. Changes in US biofuels policy can be seen as initially increasing and subsequently retarding the use of corn in ethanol production. Because the policy both mandates but also limits this use, different regimes can prevail depending on which constraints are binding. Structural break methods show that the pass-through was important over the four years 2003-07 but has subsequently been much more limited. Competitive storage theory continues to explain much of the price movement even over those four years.

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