Biofuel Growth: The Unintended Effects of the Ethanol Boom on Farmland Values

ABSTRACT This paper provides the first causal estimates of the impact of the U.S. ethanol boom on farmland values in the Midwest. Using county‐level data from the Census of Agriculture (1997–2022) and a difference‐in‐differences strategy that exploits variation in soil productivity, we find that farmland values in high corn‐suitability counties increased by $1147 per acre after 2005, equivalent to a 44% gain relative to pre‐ethanol boom levels. The effects are even larger in the most productive counties, where land values more than doubled. We also identify two reinforcing mechanisms: a short‐run response to higher corn prices and a longer‐run increase in farmland demand. These findings highlight how large‐scale energy policies can reshape rural land markets in ways that extend well beyond their intended objectives. JEL Classifications: Q11, Q24, Q28