Impacts of Biofuels on Food Prices

  • Gal HochmanEmail author
  • Deepak Rajagopal
  • Govinda R. Timilsina
  • David Zilberman
Part of the Natural Resource Management and Policy book series (NRMP, volume 41)


For the first time since the Green Revolution, food and fuel commodity prices began to rise in 2001 and reached peak levels in 2008 (FAO 2008; Peters et al. 2009; Trostle 2008a, b). As primary food commodities (e.g., corn, wheat) doubled in price, the biofuel industry expanded manifold within this same period (e.g., ethanol from corn and sugarcane doubled to 65 billion liters; biodiesel from soybean, oil palm, and rapeseed reached 12 billion liters or six times 2001 levels (Martinot and Sawin 2009). Popular opinion has linked biofuel production to the shock in food prices in 2008. Yet, much of the biofuel demand by the US and EU was driven by government mandates and subsidies, which aim to reduce the demand for oil and increase demand for agricultural goods (Hochman et al. 2010). In high-income households and countries, a smaller percentage of crop prices is reflected in the final food price (due to food processing, packaging services). In low-income households and countries, however, crop prices have much larger share of the final food price.


Biofuel Production Inventory Level Food Price Commodity Price Baseline Scenario 
These keywords were added by machine and not by the authors. This process is experimental and the keywords may be updated as the learning algorithm improves.


  1. Abbott, P. C., Hurt, C. A., & Tyner, W. E. (2008). What’s driving food prices? Oak Brook, IL: Farm Foundation.Google Scholar
  2. Alston, J. M., Beddow, J. M., & Pardey, P. G. (2009). Agricultural research, productivity, and food prices in the long run. Science, 325(5945), 1209.CrossRefGoogle Scholar
  3. Arrow, K. J., & Debreu, G. (1954). Existence of an equilibrium for a competitive economy. Econometrica: Journal of the Econometric Society, 22(3), 265–290.CrossRefGoogle Scholar
  4. Baka, J., & Roland-Holst, D. (2009). Food or fuel? What European farmers can contribute to Europe’s transport energy requirements and the Doha Round. Energy Policy, 37(7), 2505–2513.CrossRefGoogle Scholar
  5. Carter, C., Rausser, G., & Smith, A. (2008). Causes of the food price boom. Agricultural and Resource Economics Update, 12(2), 7.Google Scholar
  6. Collins, K. (2008, June 19). The role of biofuels and other factors in increasing farm and food prices: A review of recent developments with a focus on feed grain markets and market prospects. Written as supporting material for a review conducted by Kraft Foods Global, Inc. of the current situation in farm and food markets.Google Scholar
  7. De Hoyos, R. E., & Medvedev, D. (2009). Poverty effects of higher food prices—a global perspective. World Bank Policy Research Working Paper(4887).Google Scholar
  8. FAO. (2008, July). Crop prospects and food situation. Food and Agriculture Organization, (3)Google Scholar
  9. FAO. (2008). The State of Food and Agriculture—Biofuels: Prospects, risks and opportunities. Food and Agricultural Organization.Google Scholar
  10. Fischer, G., Hizsnyik, E. Prieler, S., Shah, M., & van Velthuizen, H. (2009, May) Biofuels and food security. Prepared by the International Institute for Applied Systems Analysis (IIASA) for OPEC Fund for International Development (OFID).Google Scholar
  11. Gardner, B. L. (1987). The economics of agricultural policies. New York: Macmillan.Google Scholar
  12. Glauber, J. (2008). Testimony of USDA Chief Economist Joseph Glauber before the Joint Economic committee of Congress on May 1.Google Scholar
  13. Graff, G., Hochman, G., & Zilberman, D. (2009). The political economy of agricultural biotechnology policies. AgBioForum, 12(1), 34–46.Google Scholar
  14. Graff, G., Zilberman, D., & Bennett, A. B. (2009). The contraction of product quality innovation in agricultural biotechnology. Nature Biotech, 27(8), 702–704.CrossRefGoogle Scholar
  15. Hochman, G., Kaplan, S., Rajagopal, D., & Zilberman, D. (2012). Biofuel and food-commodity prices. Agriculture, 2(3), 272–281.CrossRefGoogle Scholar
  16. Hochman, G., Rajagopal, D., Timilsina, G., & Zilberman, D. (2011) Quantifying the causes of the global food commodity price crisis. World Bank Policy Research Working Paper.Google Scholar
  17. Hochman, G., Rajagopal, D., & Zilberman, D. (2010a). The effect of biofuels on crude oil markets. Agbioforum, 13(2), 112–118.Google Scholar
  18. Hochman, G., Rajagopal, D., & Zilberman, D. (2010b). Are biofuels the culprit: OPEC, food, and fuel. American Economic Review: Papers and Proceedings, 100(2), 183–187.CrossRefGoogle Scholar
  19. Hochman, G., Sexton, S., & Zilberman, D. (2010c). The economics of trade, biofuel, and the environment (CUDARE Working Papers Series 1100). Berkeley, CA: Department of Agricultural and Resource Economics and Policy, University of California at Berkeley.Google Scholar
  20. IMF. (2008). Food and fuel prices: Recent developments, macroeconomic impact, and policy responses. Report prepared by the Fiscal Affairs, Policy Development and Review, and Research Departments.Google Scholar
  21. Ivanic, M., & Martin, W. (2010). Promoting global agricultural growth and poverty reduction. The World Bank, 18 March 2010, Manuscript. Available at
  22. Johnson, S. (2008). Commodity prices: outlook & risks. International Monetary Fund, Washington DC (April 25, 2008).Google Scholar
  23. Lampe, M. (2006). Agricultural market impacts of future growth in the production of biofuels. Paris, France: Working party on Agricultural Policies and Markets.Google Scholar
  24. Lazear, E. P. (2008, May 14). Testimony of Edward P. Lazear Chairman, Council of Economic Advisers Before the Senate Foreign Relations Committee Hearing on “Responding to the Global Food Crisis.”Google Scholar
  25. Lipsky, J. (2008). Commodity prices and global inflation. Council on Foreign Relations, New York.Google Scholar
  26. Martinot, E., & Sawin, J. (2009). Renewables global status report: 2009 update. Washington, DC: REN21 Renewable Energy Policy Network/Worldwatch Institute.Google Scholar
  27. Mitchell, D. (2008). A note on rising food prices (Policy Research Working Paper #4682, Development Prospects Group). Washington, DC: World Bank.Google Scholar
  28. Organization for Economic Co-operation and Development/Food and Agriculture Organization of the United Nations (OECD-FAO). (2008). OECD/FAO agricultural outlook 2008/2017. Author: Rome, Italy.Google Scholar
  29. Peters, M., Langley, S., & Westcott, P. (2009). Agricultural commodity price spikes in the 1970s and 1990s: Valuable lessons for today. Amber Waves, 7, 16–23.Google Scholar
  30. Rajagopal, D., Sexton, S., Hochman, G., Roland-Holst, D., & Zilberman, D. (2009). Biofuel and the food versus fuel trade-off. California Agriculture, 63(4), 20.Google Scholar
  31. Rosegrant. M. W. (2008). Biofuels and grain prices: impacts and policy response. Testimony for the US Senate Committee on Homeland Security and Governmental Affairs. Washington, DC: IFPRI.Google Scholar
  32. Schnepf, R. (2004). Energy use in agriculture: Background and issues. Report of the US Congressional Research Service and The Library of Congress.Google Scholar
  33. Sexton, S., Zilberman, D., Rajagopal, D., & Hochman, G. (2009). The role of biotechnology in a sustainable biofuel future. AgBioForum, 12(1), 1–11.Google Scholar
  34. The World Bank. (2008). World development report 2008: Agriculture for development. Author: Washington, DC.CrossRefGoogle Scholar
  35. Timilsina, G. R., & Shrestha, A. (2011). How much hope should we have for biofuels? Energy, 36, 2055–2069.CrossRefGoogle Scholar
  36. Timmer. C. P. (2008). Causes of high food prices (Asian Development Bank Economics Working Paper, 128).Google Scholar
  37. Trostle, R. (2008a). Fluctuating food commodity prices a complex issue with no easy answers. Amber Waves, 6(5), 10–17.Google Scholar
  38. Trostle, R. (2008 b) Global agricultural supply and demand: factors contributing to the recent increase in food commodity prices (Outlook Report No. WRS-0801). Economic Research Service, US Department of Agriculture.Google Scholar
  39. Williams, J. C., & Wright, B. D. (1991). Storage and commodity markets. Cambridge, MA: Cambridge University Press.CrossRefGoogle Scholar
  40. Zilberman, D., Hochman, G., Rajagopal, D., Sexton, S., & Timilsina, G. (2012). The impact of biofuels on commodity food prices: assessment and findings. American Journal of Agriculture Economics, 95(2), 275–281.CrossRefGoogle Scholar
  41. Zilberman, D., Khanna, M., & Scheffran, J. (Eds.). (2010). Handbook of bioenergy economics and policy. New York: Springer Science + Business Media.Google Scholar

Copyright information

© Springer Science+Business Media New York 2014

Authors and Affiliations

  • Gal Hochman
    • 1
    Email author
  • Deepak Rajagopal
    • 2
  • Govinda R. Timilsina
    • 3
  • David Zilberman
    • 4
  1. 1.Rutgers UniversityNew BrunswickUSA
  2. 2.Institute of the Environment and Sustainability, UCLALos AngelesUSA
  3. 3.The World BankWashington, DCUSA
  4. 4.Department of Agricultural and Resource Economics, College of Natural ResourcesUniversity of California, BerkeleyBerkeleyUSA

Personalised recommendations