SUSTAINABLE AGRICULTURE & ENERGY IN THE U.S.: A LINK BETWEEN ETHANOL PRODUCTION AND THE ACREAGE FOR CORN

The world has been witnessing the dual crises from the Covid-19 pandemic since 2019: (i) the economic crisis; and (ii) the health crisis. During crisis, it is important to revisit the sustainability of two of the most important policies on agriculture and energy for any country. Corn has played an increasingly important role in the U.S. agricultural market. As of 2018, corn accounts for about 95 per cent of the U.S. total feed grain. As such, corn is generally placed at the centre of the policies on agriculture in the U.S. The primary reason for the rise in corn production and use is due to the expansion of ethanol production. This expansion pushes corn prices to increase and provides an incentive for people to enlarge corn acreage. In addition, ethanol production has rapidly expanded over the last few decades in the U.S. Corn ethanol is expected to be a viable alternative for oil. We consider that the expansion of ethanol and corn production has many consequences. Corn price and the prices of many agricultural commodities have dramatically increased during the last decade. In this paper, the Auto Regressive Distributed Lags (ARDL) technique together with the bounds test and the estimation of short-run and long-run elasticity are utilized for the 1980-2018 period using the U.S. data. Empirical results from our paper confirm the long-run relationships between corn used in ethanol and the acreage for corn. In addition, results from our analyses support the view that the expansion of corn ethanol is a key reason behind the increase in corn acreage. We also consider that the increase in demand for corn used in ethanol production is more likely to affect the acreage. This finding implies the important role of ethanol production and expansion in the change of land use in the U.S.