A new study says the price of a barrel of oil has more to do with farm commodity prices than tax incentives, import tariffs and mandates.
Tax credits are available for those who produce ethanol, mandates are in place that require the use of biofuels and tariffs keep out ethanol from other countries, such as Brazil. None of that impacts the price of corn and soybeans as much as the price of a barrel of oil says Pat Westhoff, co-director of the University of Missouri Food and Agricultural Policy Research Institute, known as FAPRI.
Westhoff says the FAPRI study indicates oil prices drive farm commodity prices now and record oil prices have created record farm commodity prices. Oil topped $136 a barrel on Wednesday. November new crop soybeans topped $15 a bushel. December new crop corn draws close to eight dollars.
Westhoff says the study considered 13 scenarios based on 500 random factors, but never foresaw the incredible rise in oil and commodity prices. The report is 68 pages long. It reviews the impact of the 2008 Food, Conservation and Energy Act (the farm bill) as well as the Energy Independence and Security Act of 2007 (the energy bill).
FAPRI creates computer models of agriculture policy in the United States and makes a link to international agricultural models. The University of Missouri team works with members at Iowa State University.
FAPRI will issue a new analysis including the higher oil prices and new crop production estimates this summer.