CARD Initiates Biorenewables Policy Division

Bruce Babcock;
Chad Hart;
Sandy Clarke;

June 28, 2006

The Center for Agricultural and Rural Development (CARD) at Iowa State University is launching a new Biorenewables Policy Division effective July 1.

The new research division will focus on the many policy questions surrounding expansion of biorenewables in the United States and the shifting playing field this creates for midwestern producers.

Dr. Chad Hart, an economist and U.S. agricultural policy analyst, will lead the new division. Hart has been with CARD since 1999.

Rapid expansion of biorenewable products, including ethanol and biodiesel, has sparked talk of an upcoming golden era for agriculture, as society seeks alternatives to petroleum-based products. If the boom continues, ethanol may one day supplant feed as the number one use of corn.

The effects of these structural shifts will have profound implications for farmers, as well as for consumers and taxpayers. The new division will examine the long-term costs and benefits for stakeholders.

For instance, increased ethanol production has already increased corn prices, making corn acres more profitable relative to soybeans and wheat. Iowa livestock producers will thus face higher corn prices and lower prices for distillers grains, an ethanol by-product. This shift in feed prices could result in more cattle and fewer hogs in Iowa.

The Biorenewables Policy Division aims to build upon the center's strength in economic modeling and collaborative analysis. For example, a new international ethanol model will be used to project ethanol production, usage, prices, and trade. This model covers Brazil, China, the European Union, Japan, and the United States. It incorporates government policy, such as the U.S. Energy Act and Brazilian fuel mandates.

CARD Director Bruce Babcock has set the following immediate priority areas for the Biorenewables Policy Division:

  • outlook for biofuels and crops used for biofuels production
  • analysis of policy changes such as the 2007 farm bill on production and price of biofuels
  • impact of biofuels growth on the level and volatility of crop prices
  • analysis of potential for value to be captured by emergence of carbon markets
  • impact of biofuels growth on mix and location of livestock
  • impacts on local basis for corn and soybeans