Sources of Corn for Ethanol Production in the United States: A Decomposition Analysis of the Empirical Data

The use of corn for ethanol production in the United States quintupled between 2001 and 2009, generating concerns that this could lead to the conversion of forests and grasslands around the blobe, known as indirect land-use change (iLUC). Estimates of iLUC and related "food versus fuel" concerns rest on the assumption that the corn used for ethanol production in the United States would come primarily from displacing corn exports and land previously used for other crops. A number of modeling efforts based on these assumptions have projected significant iLUC from the increases in the use of corn for ethanol production. The current study tests the veracity of these assumptions through a systematic decomposition analysis of the empirical data from 2001 to 2009. The logarithmic mean divisia index decomposition method (Type I) was used to estimate contributions of different factors to meeting the corn demand for ethanol production. Results show that about 79% of the change in corn used for ethanol production can be attributed to changes in the distribution of domestic corn consumption among different uses. Increases in the domestic consumption share of corn supply contributed only about 5%. The remaining contributions were 19% from added corn production, and -2% from stock changes. Yield change accounted for about two thirds of the contributions from production changes. Thus, the results of this study provide little support for large land-use changes or diversion of corn exports because of ethanol production in the United States furing the past decade.