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Ethanol_Model_2009_AEM630_ECON430

# Ethanol_Model_2009_AEM630_ECON430 - Corn price(\$/bu...

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Corn price (\$/bu) 2.06 production (mil. bushels) 11807 exports (mil. bushels) 2100 ethanol use (mil. bushels) 1600 sugar use (mil. bushels) 755 0.06 other consumption (mil. bushels) 7352 from the identity that defines equilibrium Corn by-products (tons) 18572500 from sugar (tons) 6417500 from ethanol (tons) 12155000 price (\$ per ton) 77.56 Coefficients gallons ethanol from 1 bu corn 2.8 tons of by-product sugar 0.01 tons of by-product ethanol 0.01 Oil imports (gallons of gasoline equivalents) 225689.31 production (in gasoline equivalents) 124784.1 consumption 350473.41 gasoil for gasoline (gallons of gasoline equivalents) 78862.73 oil for other use (gallons of gasoline equivalents) 271610.68 from the identity that defines equilibrium price (\$ per gallon of gasoline equivalent excl. cons tax) 1.84 consumption tax (\$/gallon) 0.41 Ethanol imports (gallons of gasoline equivalents) 87.66 production (gallons of gasoline equiavlents) 4212.97 consumption (gallons of gasoline equivalents) 4300.63 from the identity that defines equilibrium Gasoline price determination (\$ per gallon) Supply = demand for gasoline (see model structure) 2.27

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POLICY EXPERIMENT Suppose we have an output subsidy of \$0.40 Subsidy 0 Starting values (Pa and Pb) at baseline values Input price a Pa 1.06 Input price b Pb 1.05 Input a supply 7.43 Input b supply 17.57 Production 12.13 Input a demand 7.43 Input b demand 17.57 Starting values (P and R) at baseline values Price of corn P 2.16 Price of ethanol R 2.37 Demand for gasoline T 88.82 Demand for domestic corn (non-ethanol) C 7.87 Export demand for corn U 1.86 Margin M = R - P 0.2 Production of ethanol S = (M-c)/d 0.9 Derived demand for corn from ethanol D = S/coeff 2.4 Production of gasoline V = NRηR 83.93 Excess supply curve for gasoline form ROW X = FRηX 4 Excess Demand (set the sum of squares to zero to solve model) S + V + X = T 0 Solver: set cell C103 Q = D + C + U 0 at minimum value 0 by Input a 0 changing cells C68, Input b 0 C69, C80 and C81. SUM of the squares of excess demand 0 ∆ Q 0.33 ∆Pa 0.06 ∆Pb 0.05 ∆a 0.13 ∆b 0.54 Initial profits 0 new profits = 0 ∆profits 0 A B C D E F 69 70 71 72 73 74 75 76 77 78 79 80 81 82 83 84 85 86 87 88 89 90 91 92 93 94 95 96 97 98 99 100 101 102 103 104 105 106 107 108 109 110 111 112
POLICY EXPERIMENT Suppose we have an production subsidy for corn of \$0.60 Subsidy 0.6 Starting values (Pa and Pb) at baseline values Input price a Pa 1.58 Input price b Pb 1.07 Input a supply 8.37 Input b supply 17.85 Production 12.72 Input a demand 8.37 Input b demand 17.85 Starting values (P and R) at baseline values Price of corn P 2.15 Price of ethanol R 2.36 Demand for gasoline T 88.88 Demand for domestic corn (non-ethanol) C 7.91 Export demand for corn U 1.9 Margin M = R - P 0.21 Production of ethanol S = (M-c)/d 1.09 Derived demand for corn from ethanol D = S/coeff 2.91 Production of gasoline V = NRηR 83.87 Excess supply curve for gasoline from ROW X = FRηX 3.93 Excess Demand (set the sum of squares to zero to solve model) S + V + X = T 0 Solver: set cell C95 Q = D + C + U 0 at minimum value 0 by Input a 0 changing cells C68, Input b 0 C69, C80 and C81. SUM of the squares of excess demand 0 ∆ Q 0.91 ∆Pa 0.58 ∆Pb 0.07 ∆a 1.07 ∆b 0.83 Initial profits 0 new profits = 2.61 ∆profits 2.61 A B C D E F 69 70 71 72 73 74 75 76 77 78 79 80 81 82 83 84 85 86 87 88 89 90 91 92 93 94 95 96 97 98 99 100 101 102 103 104 105 106 107 108 109 110 111 112

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Example: Corn and ethanol (no imports of etahnol; oil market; domestic prices endogenous)
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