U.S. corn and fuel ethanol prices would rise by 4 cents each if gasoline contained a 15 percent blend of the renewable fuel instead of the current 10 percent, said a University of Missouri think tank.
Ethanol groups have petitioned the Environmental Protection Agency to increase the blend to as high as 15 percent. They say a higher blend rate will help the industry through the recession, assure federal mandates for ethanol use are met and pave the way for next-generation feedstocks such as switchgrass.
Allowing 15 percent ethanol blends increases ethanol use and average corn prices, but the effects are modest, said the Food and Agricultural Policy Research Institute (FAPRI) in a study released on Friday.
Consumer food prices, running at $1.4 trillion a year, would rise by $340 million under a 15 percent blend, known in shorthand as E15, the study said.
Ethanol prices would be 4 cents a gallon higher, for an average $2.11, from 2011-18, FAPRI estimated. Ethanol use would rise by 780 million gallons annually, to average 17.3 billion gallons.
Corn would average $4.08 a bushel for the period, 4 cents higher than if there was no change in U.S. policy, the study said.
Farmers would grow slightly more corn to satisfy a 15 percent blend, while planting slightly less soybeans and wheat and idling less land in the Conservation Reserve, FAPRI said. Overall, U.S. cropland would expand by 210,000 acres, or 0.1 percent.
Feed costs for livestock and dairy producers would go up by 0.7 percent under E15, farm income would rise slightly and crop subsidies would decline by $20 million a year, the study said.
The think tank examined the impacts of E15 and 10 other scenarios for U.S. ethanol policy in response to requests from five U.S. lawmakers.
Among the options was an end of U.S. support for corn-based ethanol while retaining the federal mandate to use advanced biofuels, such as ethanol derived from grass, crop residue and wood.
Except when oil prices are high and corn supplies are ample, this (scenario) results in lower ethanol prices, production and imports, said the study.
Withdrawing support for corn-based ethanol use would drop by 13 percent on average and corn prices drop by 17 cents bushel lower than with current law.
The report, Impacts of Selected U.S. Ethanol Policy Options, was on the Internet at www.fapri.missouri.edu
(Reporting by Charles Abbott; Editing by Lisa Shumaker)