According to U.S. Department of Agriculture figures, the recent increase in crop and land prices is largely due to increased ethanol demand. A part of American energy concerns for over a decade, in recent years, ethanol production has skyrocketed. In the process, it has drastically altered crop production and agricultural demand.
In 2007, Congress mandated the production of 15 billion gallons of ethanol by 2015, with an ultimate goal of energy independence. While the country has not yet reached its target goal, ethanol production has vastly increased.
Last decade, ethanol production accounted for about 10 percent of American fuel consumption. By 2010, ethanol increased to about 40 percent of fuel consumption. The increased demand has increased the value of American corn, simultaneously driving up the value of corn producing farmland.
In addition to ethanol production, increased demand from developing nations like China and India, who are importing increasing amounts of American grains, has further pushed up the price of corn, leading to an overall increase in food prices.
However, some farmers and economists are worried that the boom could end soon. If the price of ethanol goes down it could lead to a wider price collapse that could devastate farmers across the Corn Belt. The ultimate test could come during the upcoming congressional budget fight. A sharp decrease in ethanol subsidies or congressional ethanol mandates could lead to a dip in corn prices and a drop in land value.
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Written by: Justin Ellison / Farm Plus Staff Writer