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Corn Prices Could Soar To $6.50 A Bushel Under ‘25-by-25’ Proposal, Study Says

by 5m Editor
12 September 2007, at 10:08am

US - With corn ethanol production predicted to approach 25 billion gallons under the “25-by-25” Senate proposal, the corn price in 2025 is projected to rise to $6.50 a bushel if the proposal is enacted, according to a recent study by the Department of Energy.

The projected level of about 25 billion gallons of corn ethanol production in 2025 under the policy would significantly increase U.S. corn demand and likely require much higher prices to clear the market, with a significant impact on food and feed markets and a large cut in, or elimination of, U.S. corn exports, the study states.

According to the study, impacts of these rising corn prices on the prices of other domestic and international agricultural food and feed products — and ultimately on U.S. economic growth — is highly uncertain but potentially larger than the direct energy price impacts alone.

The study also found the mandate will result in dramatic increases in biofuels consumption and reduced consumption of petroleum-based fuels. To meet the RFS requirements, it will take nearly four times the amount of fuel from renewable sources than is used today.

The study was conducted at the request of Sen. James Inhofe (R-OK) for analysis of the “25-by-25” proposal that combines a requirement that a 25 –percent share of electricity sales be produced from renewable sources by 2025 with a requirement that a 25–percent share of liquid motor transportation fuel sales also be derived from renewable sources by 2025. The electricity requirement is implemented as a renewable portfolio standard (RPS), while the motor fuel standard is implemented as a renewable fuel standard (RFS).

Further Reading

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5m Editor