The U.S. ethanol boom of the early 2000s increased farmland values in Midwest corn-producing regions by as much as 44%, according to a new study from South Dakota State University.

The study, published in Applied Economic Perspectives and Policy, examined how federal renewable fuel mandates, rising oil prices and growing ethanol demand affected agricultural land markets after the Renewable Fuel Standard was established in 2005.

According to the study, farmland values in high corn-suitability counties increased by approximately $1,147 per acre after 2005, representing a 44% gain compared to pre-ethanol boom levels. In the most productive counties, land values more than doubled.

“The ethanol boom substantially increased farmland values in the Midwest, with effects intensifying as renewable fuel requirements expanded and crop markets adjusted,” Le said. “From a policy perspective, these results highlight that biofuel mandates influenced not only commodity markets but also the rural land market, with farmland values serving as a key channel through which energy policy reshaped the agricultural economy.”

The ethanol industry’s rapid expansion in the early 2000s followed a combination of rising crude oil prices, the phaseout of methyl tert-butyl ether, or MTBE, and federal energy policies supporting renewable fuels. Congress passed the Energy Policy Act of 2005, establishing the Renewable Fuel Standard program, which mandated minimum renewable fuel blending volumes in the nation’s transportation fuel supply.

The mandate sharply increased demand for corn, the primary ethanol feedstock. Researchers noted the Renewable Fuel Standard contributed to an estimated 30% increase in corn prices between 2006 and 2014, driving expanded corn production throughout the Midwest.

“Counties with the highest soil productivity — those with high corn suitability — were best positioned to respond to increased demand and rising corn prices,” Le said.

The study identified both immediate and long-term impacts from ethanol-driven demand growth. Higher corn prices initially boosted farm revenues, while expectations for sustained agricultural returns later increased competition for productive farmland.

“Our analysis highlights two complementary mechanisms linking ethanol expansion to farmland values,” Le said. “In the short run, higher corn prices raised farm revenues following the increase in ethanol demand. Over time, higher expected agricultural returns increased demand for productive farmland, generating persistent appreciation in land values.”

Researchers also found differences in how farmland appreciation occurred across rural communities. Lower-income counties experienced rapid gains beginning as early as 2007, while higher-income counties saw more gradual increases.

“The magnitude and persistence of this farmland appreciation suggest that biofuel mandates have had real consequences for rural wealth and land access,” Le said. “By substantially increasing the value of farmland, the ethanol boom likely altered patterns of wealth accumulation in rural areas and affected access to land for new and beginning farmers.”

The study arrives as federal renewable fuel policy continues evolving. In March, the U.S. Environmental Protection Agency updated Renewable Fuel Standard volume obligations for 2026 and 2027. The agency raised total renewable fuel volume obligations to 25.82 billion Renewable Identification Numbers, or RINs, for 2026 and 25.98 billion RINs for 2027, compared to 22.33 billion RINs set for 2025.

While conventional ethanol volumes remain unchanged from 2025 levels, production targets for advanced biofuels such as biomass-based diesel and renewable diesel are expected to increase about 60%. Because those fuels rely heavily on soybean oil feedstocks, EPA estimates the updated rules will increase the combined value of corn and soybean oil by approximately $2 billion in 2026.

Le said the findings illustrate how future climate and energy policies could continue influencing agricultural land markets and rural economies.

“Our results highlight how large-scale energy policies can reshape agricultural land markets in ways that extend well beyond their original objectives,” Le said. “Recognizing these spatially diffuse and persistent effects is essential for a full accounting of biofuel mandates and for anticipating how future climate and energy policies may influence land markets and rural economies.”

Source: South Dakota State University, "How did the ethanol boom of the 2000s impact farm values in the Midwest?"