The Effect of the 2007 Ethanol Mandate on Downside Risk in Agriculture: Evidence from Kansas Farmers

10 Pages Posted: 9 Oct 2017 Last revised: 18 Oct 2017

See all articles by Levi Russell

Levi Russell

Ottawa University

Dallas Wood

RTI International

Michael R. Langemeier

Center for Commercial Agriculture

Gregory Ibendahl

Kansas State University - Department of Agricultural Economics

Date Written: October 17, 2017

Abstract

The Energy Independence and Security Act of 2007 increased the amount of corn ethanol that must be blended into motor vehicle and other fuels as part of the Renewable Fuel Standard. The purpose of this paper is to look at how the increase in demand for corn influenced the profitability of farms. We conducted this investigation using annual data for more than 300 farms in Kansas from 1997 through 2014. We find that the probability of a farmer’s experiencing a negative return on equity (i.e., the “downside risk” of farming) decreased by 25 percentage points after 2007.

Keywords: Ethanol Mandate, Downside Risk

JEL Classification: Q12, Q14, Q18, H23

Suggested Citation

Russell, Levi and Wood, Dallas and Langemeier, Michael and Ibendahl, Gregory, The Effect of the 2007 Ethanol Mandate on Downside Risk in Agriculture: Evidence from Kansas Farmers (October 17, 2017). Available at SSRN: https://ssrn.com/abstract=3042964 or http://dx.doi.org/10.2139/ssrn.3042964

Levi Russell (Contact Author)

Ottawa University ( email )

Ottawa, KS 66067
United States

HOME PAGE: http://www.levirussell.com

Dallas Wood

RTI International ( email )

PO Box 12194
Research Triangle Park, 27709
United States
9195417206 (Phone)
9195417206 (Fax)

Michael Langemeier

Center for Commercial Agriculture ( email )

610 Purdue Mall
West Lafayette, IN 47906
United States

Gregory Ibendahl

Kansas State University - Department of Agricultural Economics ( email )

Manhatten, KS 66506-4001
United States

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