The Effects of Ethanol Policy on Cattle Production

Abstract

Corn-based ethanol production has increased dramatically in the past ten years, causing an increase in demand for corn by ethanol producers and an increase in production of ethanol by-products such as distillers' grains. The increase in ethanol production can be attributed to ethanol policy at the state and federal levels. Because of the increase in production of corn-based ethanol, cattle producers face greater competition for a major feed source, corn, and greater supply of an emerging feed source, distillers' grains. The objective of this study is to analyze and quantify the effects of ethanol policy on cattle production. A theoretical model and an econometric model are used to fulfill the objectives of this study. The theoretical model contains an ethanol model and a general livestock model. Results of the theoretical model present the possibilities of ethanol policy affecting cattle production. The econometric model identifies the indirect and direct effects of ethanol policy on cattle production. The results of the econometric model indicate that there is a relationship between ethanol policy, specifically the Renewable Fuel Standard, and cattle production.