Abstract
We summarize a large set of recent simulations and policy analyses based on FAPRI’s world multimarket, partial-equilibrium models. We first quantify and project the emergence of biofuel markets in US and world agriculture for the coming decade. Then, we perturb the models with incremental shocks in US and world ethanol consumption in deviation from this projected emergence to assess their effects on world agricultural and food markets. Various food−biofuel trade-offs are quantified and examined. Increases in food prices are moderate for the US ethanol expansion and even smaller for the ethanol expansion outside the United States, which is based on sugarcane feedstock, and which has little feedback on other markets. With the US expansion, the high protection in the US ethanol market limits potential adjustments in the world ethanol markets and increases the demand for feedstock within the United States. Changes in US grain and oilseed market prices propagate to world markets, as the United States is a large exporter in these markets. With changes in world prices, land allocation in the rest of the world responds to the new relative prices as in the United States but with smaller magnitudes because price transmission to local markets is less than full.
Authors: All authors are affiliated with Iowa State University unless noted otherwise •Jacinto F. Fabiosa is a scientist and co-director of FAPRI-ISU •John C. Beghin is a Marlin Cole Professor of International Agricultural Economics •Fengxia Dong is an associate scientist •Amani Elobeid is an associate scientist •Simla Tokgoz was an associate scientist and is now a research fellow at IFPRI •Tun-Hsiang Yu was an associate scientist and is now an assistant professor at the University of Tennessee in Knoxville
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- 1.
These sets of models are jointly developed by a consortium, with the international models developed by FAPRI at Iowa State University and the US models by FAPRI at the University of Missouri. The individual commodity models or the full set of models have been employed for numerous studies, such as Abler et al. (2008), Elobeid et al. (2007), Fabiosa et al. (2007), Elobeid and Beghin (2006), and Fabiosa et al. (2005). The FAPRI models have been used by several organizations to develop baselines as well as for policy analysis.
- 2.
See Tokgoz et al. (2007), pages 3–5, and Elobeid et al. (2007) for further discussion of these conditions and implications. The two scenarios (expansions inside and outside the United States) are, respectively, based on dedicated baselines. Changes in assumptions occur between these baselines although their underlying modeling approach is the same.
- 3.
Although the Chinese government has stopped approving new grain-based ethanol plants because of food security concerns, the Chinese Renewable Energy Plan mandates an almost tenfold increase in fuel ethanol production, to 3.3 billion gallons (mostly from non-grain feedstock) by 2020 (USDA-FAS 2008b).
- 4.
For each year, theFAPRI U.S. and World Agricultural Outlook provides 10-year projections. For comparison among Outlooks, we chose the years 2006, 2009, 2012, and 2015, although the first year and last years of the projection differ across the three Outlooks.
- 5.
This is calculated based on 23 gallons of ethanol per ton of sugarcane and 75 tons of sugarcane per hectare.
- 6.
This statement holds ceteris paribus, i.e., factors such as crude oil prices may have a larger impact on ethanol prices, which override supply-side forces in the ethanol market. This is indicated in Tokgoz et al. (2008), wherein a moderate increase in crude oil prices has a significant impact on ethanol prices.
- 7.
The conclusion that the biofuel expansion has had some impact on food prices but that most of the recent dramatic increase in prices is a result of other factors including high crude oil prices and income growth has been put forth by other studies, including OECD (2008) and Trostle (2008).
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Fabiosa, J.F., Beghin, J.C., Dong, F., Elobeid, A., Tokgoz, S., Yu, TH. (2010). The Global Bioenergy Expansion: How Large Are the Food−Fuel Trade-Offs?. In: Khanna, M., Scheffran, J., Zilberman, D. (eds) Handbook of Bioenergy Economics and Policy. Natural Resource Management and Policy, vol 33. Springer, New York, NY. https://doi.org/10.1007/978-1-4419-0369-3_8
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