New analysis finds ethanol has had little to no impact on post-1980 growth in total U.S. corn use, as corn’s alternative uses and market responses offset policy-driven demand
Ethanol has had little to no impact on post-1980 growth in total U.S. corn use. This should not surprise. Corn has alternative uses. Policy favoring one use can generate economic responses that reduce growth in other uses. U.S. soybeans may repeat this experience: little to no impact on long-term growth in total soybean use from policies favoring biofuels.
Total U.S. corn use trends
Using data from the USDA’s Foreign Agriculture Service Production, Supply, and Distribution (PSD) database, a strong upward trend exists in the total use of U.S. corn since 1985, when a U.S. farm policy decision lowered price support levels to incentivize use.
A regression equation, composed of a linear time trend plus two variables that reflect the 2005 and 2007 Renewable Fuel Standards (RFS), explains 97% of the growth in total U.S. corn use since 1981. The analysis finds that growth in total U.S. corn use before and after RFS has not differed with statistical confidence.
Food-Seed-Industrial use
Food, seed, and industrial (FSI) use of U.S. corn more than doubled from 2005–2010, from 3.0 million to 6.4 billion bushels. This rapid growth was due to the interplay between the RFS and the ban on use of MTBE as an octane enhancer, which predates the RFS.
Since 2010, FSI use has increased only 0.5 billion bushels. The time-trend regression finds no statistically significant difference in the intercept in the periods before and after RFS. But annual trend growth has been statistically significantly higher post-RFS: 0.14 vs. 0.07 billion bushels in 2005–2025 vs. 1981–2004.
When combined, these findings suggest the RFS squeezed longer-term growth into a much shorter time, i.e. 2005–2010.
Feed use
U.S. feed use of corn fell from 6.1 million to 4.8 billion bushels from 2005 to 2010, offsetting 39% of the growth in FSI use over this period. Feed use for the 2025 crop year is forecast at 6.2 billion bushels. If realized, feed use would finally exceed the 6.1 billion bushels fed in 2005 (and 2004).
Regression analysis finds no statistically significant change in the intercept but a statistically significant change in the time trend. The time-trend change is an annual decline in feed use that nearly offsets the time-trend increase in FSI use (-0.06 vs. +0.07 billion bushels).
Exports
From 2005–2010, U.S. corn exports declined from 2.1 million bushels to 1.9 billion. More important, from 1981–2015, U.S. corn exports only occasionally exceeded the 2.0 billion bushels exported in 1981.
Since 2015, exports have exceeded 2 billion bushels every year except 2019 and 2022; they are projected at 3.3 billion bushels for 2025. The regression time-trend analysis finds a statistically significant higher growth in exports post-RFS, but a statistically significant post-RFS intercept that is 1 billion bushels lower.
Discussion
It is difficult to pick out the 2005–2010 period of rapid growth in corn ethanol production from a graph of total corn use since 1981. Regression analysis supports this visual difficulty.
The limited impact of U.S. ethanol policy on long-run growth in total U.S. corn use should not come as a surprise. Corn has alternative uses. Policy designed to spur one use, such as ethanol, will increase price, slow growth, and reduce other uses, such as feed and exports in the case of ethanol.
At best, U.S. ethanol policy spurred a short-term increase in U.S. corn demand and price. The strong growth in U.S. corn exports since 2010 and especially since 2015 is likely no coincidence, as it overlaps with the slow growth in use of corn for ethanol.
Implications for soybeans
A reasonable hypothesis: The same outcome is likely for recent U.S. policy decisions favoring biofuels for U.S. soybeans. Specifically, this means little to no discernible impact on the long-term growth in total soybean use, but with the potential for short-run increases in total use and price amid major impacts on other uses.
The analysis documents the increasing evidence that U.S. ethanol policy did not alter long-term growth in total U.S. corn use. The associated implication is that effective demand-enhancing policy needs to respect the private market’s organic (nonpolicy) growth, especially in other uses.
