COMMODITY STORAGE AND THE MARKET EFFECTS OFBIOFUEL POLICIES

Legislation passed in 2007 by the U.S. Congress increased by about 1.3 billion bushels the net amount of corn required to be processed annually into ethanol for motor-fuel use. We estimate that corn prices were about 30% higher from 2006 to 2014 than they would have been without this demand increase. We develop a partially identified structural vector autoregression model. Our identification strategy is unique in the literature because it enables us to estimate the effects of transitory shocks, such as weather, separately from the effects of persistent shocks, such as the increased ethanol mandate. Moreover, by only partially identifying our model, we show how to generate robust conclusions without strong identifying assumptions.