Drought, biofuel, and livestock

Abstract

The effects of droughts are estimated for three major livestock market (beef, pork, and poultry) prices and two major related agronomy market (corn and soybeans) prices along with ethanol prices. Results indicate summer droughts have a significant positive effect on prices of corn, soybeans, and beef. Also, the linkages among the markets are investigated with results indicating in both the short- and long-run there are no price impact effects across crop and livestock markets. These results support the conclusion of Environmental Protection Agency that a waiver relaxing the ethanol-fuel mandate would have minimal impact on crop and livestock prices.