by Richard Taylor and Won W. Koo (Center for Agricultural Policy and Trade Studies North Dakota State University) … The first immediate impact of ethanol was increased agricultural commodity prices. In 2005, the corn price averaged $2.00 per bushel. At the end of 2006, the price of corn was $3.37 per bushel. Corn prices averaged to $5.72 per bushel between 2010 and 2013. The second impact was felt in net farm incomes. The net farm income in the United States increased 31.9% from about $55.5 billion during 1997-2004 to $73.2 billion during 2005-2010 and then rose 65.0% from 2005-2010 to $120.8 billion in 2011-2013. The third impact was the cost of agricultural inputs. Between 1997 and 2004, U.S. farm input costs averaged $124.4 billion compared to $171.9 billion in 2005-2010. During 2011 through 2013, U.S. farm expenses averaged $231.8 billion. Expenses increased almost 100% within a little more than a decade. Finally, land prices began to increase. U.S. land prices rose an average of 5.6% per year between 1997 and 2004. From 2005 to 2010, U.S. land prices increased an average of 8.2% per year and, land prices further rose 8.5% per year between 2011 and 2013.
North Dakota agriculture experienced similar rapid changes in commodity prices, net farm income, farm expenses, and land prices. North Dakota net farm income averaged $855 million per year between 1997 and 2005. From 2005 to 2010, net farm income increased 98% to an average of $1.69 billion. Between 2011 and 2013, net farm income rose another 125% to $3.81 billion. Expenses in North Dakota increased from an average of $2.31 billion between
1997 and 2004 to an average of $3.27 billion between 2005 and 2010. During 2011-2013, expenses averaged $4.79 billion. North Dakota land prices increased from an average of $443 per acre between 1997 and 2009 to an average of $627 between 2005 and 2010. Finally, North Dakota land prices increased 106%, to $1,293 per acre, between the 2004-2010 average and the 2011-2013 average.
There are several variables which are linked with interconnected relationships. Ethanol production, net farm income, operating expense, and price levels impact each other. …
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Wheat acres in North Dakota have fallen from the 10-11 million acre range in the 1975-1995 period to 6-7 million acres in the 2010-2013 period. Corn acres have increased from 500 thousand in 1975 to about 3.9 million in 2013 while soybean acres increased from 180 thousand in 1975 to 4.7 million in 2013. Figure 3 shows the index of changes for planted acres which occurred after the FAIR act and prior to the large increase in ethanol production. The FAIR Act allowed the crop mix in the United States to be adjusted with the new corn uses. This change is
important because production costs for the various commodities are different. As the planted acres change from small grains (wheat) to row crops (corn and soybeans), receipts at the farm service and supply store will increase beyond price impacts. READ MORE