Corn Ethanol Expansion and the Evolution of US Crop Patterns

T. Jake Smith, GianCarlo Moschini
December 2023  [23-WP 656]

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Suggested citation:

Smith, T.J. and G. Moschini. 2023. "Corn Ethanol Expansion and the Evolution of US Crop Patterns." Working paper 23-WP 656. Center for Agricultural and Rural Development, Iowa State University.


Abstract

The 2007 expansion of the U.S. Renewable Fuel Standard (the so-called RFS2) has had significant, and controversial, impacts on U.S. agriculture. We combine rich spatial data on observed crop choices with two metrics of corn demand by the ethanol industry to estimate the impact of the RFS2 on crop patterns. Crop choices are observed at the field level using two recent extensions of the Cropland Data Layer database. The time path of the RFS2 mandate captures its corn demand expansion at the aggregate level, and the heterogeneous impact of this biofuel policy across space is measured by a novel local ethanol demand index computed at the field level. This framework permits us to characterize both the local and overall impacts of the RFS2. We find that the ceteris paribus local presence of RFS2-induced ethanol plants, for the 13 Midwest states in the analysis, increased total corn area by 1.6%, increased the area of corn following corn by 4.3%, and had a small, spatially heterogeneous impact on soybeans. Of more consequence is the overall impact of the RFS2, which is estimated to have increased total corn area by 9.7% and corn following corn by 16.8%. Interestingly, total soybean area was also significantly impacted by the RFS2, increasing by 6.7%, and corn-soybean rotations increased by about 10%. These results indicate a major impact of the RFS2 on the geography of corn and soybean cultivation—intensification in the heart of the Corn Belt, and significant expansion near the periphery of the Corn Belt—which included the conversion of 13.9% of land previously used for other crops and/or conservation to corn/soybean production.