Economic Analysis of Ethanol Production from Sorghum on Crop Acreages Change in the United States

The U.S. Energy Independence and Security Act of 2007 mandate requires that total biofuel production to increase to 36 billion gallons by 2022. The same policy further specifies that more than 55% of total biofuel production by 2022 must come from sources – grain, sorghum etc. – other than cornstarch. Further, in 2012, Environmental Protection Agency announced that grain sorghum ethanol is qualified as advanced renewable fuel. This may result in the land use change from planting wheat and other grains to planting sorghum. This article examines the impact of biofuel mandate on wheat, corn, soybean, and sorghum prices and their acreages change using acreage supply function, accounting for price expectation and risk. We follow a similar approach used by Braulke (1982). The stochastic partial equilibrium model is also used to evaluate the short run implication of demand and supply shock of the policy on acreages change in the USA.