Disentangling Short-Run COVID-19 Price Impact Pathways in the U.S. Corn Market

Abstract

The COVID-19 pandemic induced numerous supply chain shocks in U.S. agricultural markets though few empirical studies have sought to disentangle commodity price impacts caused by unique changes in food and non-food agricultural product demand. Using a data-modified version of the relative-price-of-a-substitute method, we distinguish the consequences of the sharp decline in U.S. automotive fuel demand from the consequences of non-ethanol demand changes in the U.S. corn market. Our results indicate that the onset of the COVID-19 pandemic reduced Illinois cash prices for corn by approximately 18%. The majority of this impact (approximately 16%) was driven by pandemic-induced ethanol demand reductions. Ethanol-driven and total impacts were greater in locations farther from terminal markets.

Keywords: corn prices, COVID-19, ethanol, stay-at-home order, relative price of a substitute

JEL Classification: Q11, Q16, Q41