Hostname: page-component-745bb68f8f-b95js Total loading time: 0 Render date: 2025-02-04T12:24:28.503Z Has data issue: false hasContentIssue false
  • English
  • Français

Biofuels: Potential Production Capacity, Effects on Grain and Livestock Sectors, and Implications for Food Prices and Consumers

Published online by Cambridge University Press:  26 January 2015

Dermot Hayes ,
Bruce Babcock ,
Jacinto Fabiosa ,
Simla Tokgoz ,
Amani Elobeid ,
Tun-Hsiang Yu ,
Fengxia Dong ,
Chad Hart ,
Eddie Chavez  and
Suwen Pan
...Show all authors
Dermot Hayes
Affiliation:
Iowa State University, Ames, IA
Bruce Babcock
Affiliation:
Iowa State University, Ames, IA
Jacinto Fabiosa
Affiliation:
Iowa State University, Ames, IA
Simla Tokgoz
Affiliation:
Iowa State University, Ames, IA
Amani Elobeid
Affiliation:
Iowa State University, Ames, IA
Tun-Hsiang Yu
Affiliation:
University of Tennessee, Knoxville, TN
Fengxia Dong
Affiliation:
Iowa State University, Ames, IA
Chad Hart
Affiliation:
Iowa State University, Ames, IA
Eddie Chavez
Affiliation:
University of Arkansas, Lubbock, TX
Suwen Pan
Affiliation:
Texas Tech University, Lubbock, TX
Miguel Carriquiry
Affiliation:
Iowa State University, Ames, IA
Jerome Dumortier
Affiliation:
Iowa State University, Ames, IA
Get access Rights & Permissions [Opens in a new window]

Abstract

We examined four evolution paths of the biofuel sector using a partial equilibrium world agricultural sector model in CARD that includes the new RFS in the 2007 EISA, a two-way relationship between fossil energy and biofuel markets, and a new trend toward corn oil extraction in ethanol plants. At one extreme, one scenario eliminates all support to the biofuel sector when the energy price is low, while the other extreme assumes no distribution bottleneck in ethanol demand growth when the energy price is high. The third scenario considers a pure market force driving ethanol demand growth because of the high energy price, while the last is a policy-induced shock with removal of the biofuel tax credit when the energy price is high. Standard results hold where the biofuel sector expands with higher energy price, raising the prices of most agricultural commodities through demand side adjustment channels for primary feedstocks and supply side adjustment channels for substitute crops and livestock. On the other hand, the biofuel sector shrinks coupled with opposite impacts on agricultural commodities with the removal of all support including the tax credit. Also, we find that given distribution bottlenecks, cellulosic ethanol crowds marketing channels resulting in a corn-based ethanol price that is discounted. The blenders' credit and consumption mandates provide a price floor for ethanol and for corn. Finally, the tight linkage between the energy and agricultural sectors resulting from the expanding biofuel sector may raise the possibility of spillover effects of OPEC's market power on the agricultural sector.

Keywords

biofuelEISAethanoltax creditworld agricultural sector modelQ13Q18Q38
Type
Invited Paper Sessions
Information
Journal of Agricultural and Applied Economics , Volume 41 , Issue 2 , August 2009 , pp. 465 - 491
Copyright
Copyright © Southern Agricultural Economics Association 2009

Access options

Get access to the full version of this content by using one of the access options below. (Log in options will check for institutional or personal access. Content may require purchase if you do not have access.)

References

Du, X., and Hayes, D.J. “The Impact of Ethanol Production on U.S. and Regional Gasoline Prices and on the Profitability of the U.S. Oil Refinery Industry.” CARD Working Paper 08-WP 467, Center for Agricultural and Rural Development, Iowa State University, April 2008. Internet site: http://www.card.iastate.edu/publications/synopsis.aspx?id=1076.CrossRefGoogle Scholar
Elobeid, A., Tokgoz, S. Hayes, D.J., Babcock, B.A., and Hart, C.E. “The Long-Run Impact of Corn-Based Ethanol on the Grain, Oilseed, and Livestock Sectors: A Preliminary Assessment.” AgBioForum 10, 1(2007:11–18.Google Scholar
Food and Agricultural Policy Research Institute (FAPRI). Baseline Briefing Book. FAPRI-MU Report #03-08. University of Missouri, March 2008.Google Scholar
Kalaitzandonakes, N., Kaufman, J. Meyer, S. and Thompson, W. “The Impact of GM Corn Traits on Biofuel Production.” Transition to a Bio-economy: Environmental and Rural Development Impacts. Farm Foundation Conference Proceedings, October 15, 2008.Google Scholar
Light, J., and Shevlin, T. “The 1996 Grain Price Shock: How Did It Affect Food Inflation?” Monthly Labor Review 121(August 1998).Google Scholar
Searchinger, T., Heimlich, R. Houghton, R.A., Dong, F. Elobeid, A. Fabiosa, J. Tokgoz, S. Hayes, D. and Yu, T-H. “Use of U.S. Croplands for Biofuels Increases Greenhouse Gases through Emissions from Land Use Change.” Science 319, 5867(2008): 123840.CrossRefGoogle ScholarPubMed
Thompson, W., Westhoff, P., and Meyer, S. “Model of the US Ethanol Market.” FAPRI-MU Report #07-08. University of Missouri, July 2008.Google Scholar
Tokgoz, S., Elobeid, A.E., Fabiosa, J.F., Hayes, D.J., Babcock, B.A., Yu, T-H. Dong, F., and Hart, C.E. “Bottlenecks, Drought, and Oil Price Spikes: Impact on U.S. Ethanol and Agricultural Sectors.” Review of Agricultural Economics 30, 4(2008:604–22.Google Scholar
Tokgoz, S., Elobeid, A., Fabiosa, J.F., Hayes, D.J., Babcock, B.A., Yu, T.-H., Dong, F., Hart, C.E., and Beghin, J.C. “Emerging Biofuels: Outlook of Effects on Grain, U.S., Oilseed, and Livestock Markets.” CARD Staff Report 07-SR 101, Center for Agricultural and Rural Development, Iowa State University, July 2007 (Revised). Internet Site: http://www.card.iastate.edu/publications/synopsis.aspx?id= 1050.Google Scholar
Westhoff, P., Thompson, W., and Meyer, S. “Biofuels Impact of Selected Farm Bill Provisions and Other Biofuel Policy Options.” FAPRI-MU Report #06-08. University of Missouri, June 2008.Google Scholar