Abstract  The rapid expansion of biofuel production has generated considerable interest within the body of empirical economic literature that has sought to understand the impact of biofuel growth on the global food economy. While the consensus within the literature is that biofuel emergence is likely to have some effect on future world agricultural market, there is a considerable range in the estimated size of the impact. Despite the importance of this topic to policy makers, there has been no study that has tried to reconcile the differences among various outlook studies. This paper undertakes an in-depth review of some key outlook studies which quantify the impacts of biofuels on agricultural commodities, and which are based on either general-equilibrium (GE) or partial-equilibrium (PE) modeling approaches. We attempt to reconcile the systematic differences in the estimated impacts of biofuel production growth on the prospective prices and production of three major feedstock commodities, maize, sugar cane, and oilseeds across these studies. Despite the fact that all models predict positive impacts on prices and production, there are large differences among the studies. Our findings point to a number of key assumptions and structural differences that seem to jointly drive the variations we observe, across these studies. The differences among the PE models are mainly due to differences in the design of scenarios, the presence or absence of biofuel trade, and the structural way in which agricultural and energy market linkages are modeled. The differences among the GE models are likely to be driven by model assumptions on agricultural land supply, the inclusion of the byproducts, and assumptions on crude oil prices and the elasticity of substitution between petroleum and biofuels. (C) 2012 Elsevier Ltd. All rights reserved.

Abstract  We investigate the impacts of the U.S. renewable fuel standard (RFS2) and several alternative biofuel policy designs on global GHG emissions from land use change and agriculture over the 2010-2030 horizon. Analysis of the scenarios relies on GLOBIOM, a global, multi-sectoral economic model based on a detailed representation of land use. Our results reveal that RFS2 would substantially increase the portion of agricultural land needed for biofuel feedstock production. U.S. exports of most agricultural products would decrease as long as the biofuel target would increase leading to higher land conversion and nitrogen use globally. In fact, higher levels of the mandate mean lower net emissions within the U.S. but when the emissions from the rest of the world are considered, the US biofuel policy results in almost no change on GHG emissions for the RFS2 level and higher global GHG emissions for higher levels of the mandate or higher share of conventional corn-ethanol in the mandate. Finally, we show that if the projected crop productivity would be lower globally, the imbalance between domestic U.S. GHG savings and additional GHG emissions in the rest of the world would increase, thus deteriorating the net global impact of U.S. biofuel policies. (C) 2013 Elsevier Ltd. All rights reserved.

Abstract  The literature on the impacts of biofuels on agricultural commodity prices is characterized by contradictory findings. We review studies published between 2007 and 2014 that estimate the effects of U.S. corn ethanol policy on corn prices and find estimates ranging from nil to over 80%. Such divergent results make it difficult to assess the merits of alternative biofuel policies. To bring more clarity to the issue and facilitate comparisons across studies, we assemble a database of over 150 medium-to-long run estimates of the effect of corn ethanol production on corn prices from 29 published studies. We first normalize corn price impacts by the change in corn ethanol volume to control for the large differences in ethanol quantities across scenarios. We then conduct a meta-analysis to identify the factors that drive the remaining variation in corn price impacts across studies. In addition to ethanol volumes, we find that modeling framework, projection year, inclusion of ethanol co-products, and biofuel production from other feedstocks explain much of the differences in price effects. The results indicate that a one billion gallon expansion of the US corn ethanol mandate in the year 2015 would lead to a three to four percent increase in corn prices, with smaller price changes projected in future years. Published by Elsevier Ltd.

Abstract  This study seeks to assess the future impacts of biofuel production on regional agricultural and related sectors over the next decade with a specific focus on the vulnerable regions of developing nations. Using a modification of the GTAP modeling platform to account for the global interactions of regional biofuel and food markets, the analysis shows that biofuel production levels depend on the assumption about the future price of energy and the nature of the substitutability between biofuels and petroleum-based transport fuels. Low energy prices reduce the demand for biofuels and thus require greater government support to meet the desired production targets. At the other extreme, when prices are high and there is scope for substituting biofuels for petroleum-based fuels, the volume of biofuels produced will exceed the mandates. Even when biofuels are being mainly produced in developed countries, our results indicate that there are impact pathways that extend far beyond the borders of the US, Brazil and the EU. Prices of feedstock and non-feedstock commodities rise in developing countries. There is also a rise in value added from the agricultural sector—a gain that is enjoyed by the owners of land and labor, including unskilled. Hence, to the extent that agriculture is a key sector in getting growth started and addressing poverty needs, the emergence of biofuels can (in this way at least) be a positive force.

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.

Abstract  The US Renewable Fuel Standard sets a lower bound on the amount of biofuels used, with consequences for behavior of agricultural commodity markets that currently supply the vast majority of feedstocks for biofuel production. In this article, maize biotechnology is considered taking into account the impacts of US biofuel mandates. The impact of a hypothetical technology that reduces the severity of negative maize yield shocks is estimated using a structural economic model simulated stochastically. The importance of mandated levels of use of biofuels depends on whether they are binding. If biofuel use exceeds mandated levels, then mandates have little impact. If mandates are binding, then the markets' ability to respond to price movements can be reduced. In either case, aggregate maize demand is inelastic in these projections, so yield technology improvements can reduce total revenue to maize production.

Abstract  The D4 RIN is the tradable compliance certificate for the biomass-based diesel (BBD) mandate in the renewable fuel standard (RFS). Understanding the price dynamics of the D4 RIN is important for understanding the RFS because its price sets a ceiling on the ethanol RIN (D6) and because some observers have suggested that RIN price fluctuations are too large to be explained by economic theory. We use option pricing theory to develop a model of the D4 RIN in terms of its economic fundamentals: the spread between the price of biodiesel and petroleum diesel and the status of the biodiesel blenders’ tax credit. The resulting D4 fundamental price closely tracks actual D4 prices. We conclude that RIN price volatility arises because of the design of the RFS and intrinsic features of the U.S. fuel supply system.

Abstract  Despite a large number of studies that examine the influence of biofuels and biofuel policy on commodity prices, the impact of biofuel policy on commodity price variability is poorly understood. A good understanding of biofuel policy’s impact on price variability is important for mitigating food insecurity and assisting policy formation. We examine how U.S. ethanol policies such as the Renewable Fuel Standard (RFS) mandates and the blend wall affect the price variability of corn and gasoline. We first present an analytical and graphical framework to identify the effect and then use stochastic partial equilibrium simulation to measure the magnitude of the impacts. We show that RFS mandates and the blend wall both reduce the price elasticity of demand for corn and gasoline and therefore increase the price variability when supply shocks occur to the markets. This has important implications for policy actions with respect to maintaining or changing the current RFS mandates and/or blend wall in the US.

Abstract  The increase in ethanol blended into U.S. gasoline is often attributed to the Renewable Fuels Program (RFS), however, other factors such as rising gasoline prices and the phase-out of MTBE were also factors driving ethanol demand at the same time that the RFS program was being implemented. This study conducts a detailed evaluation of ethanol’s blending cost into E10 gasoline, including octane and volatility costs, production cost and spot prices, distribution costs, and federal and state subsidies, while omitting RIN values, to assess whether ethanol would have been economical to blend into gasoline regardless of the RFS program. Based on this analysis, economic factors alone were sufficient to cause the observed growth in ethanol use.

Abstract  Because farm real estate represents much of the value of U.S. farm sector assets, large swings in farmland values can affect the financial well-being of agricultural producers. This report examines both macroeconomic (interest rates, prices of alternative investments) and parcel-specific (soil quality, government payments, proximity to urban areas) factors that affect farmland values. In the last few years, U.S. farmland values have been supported by strong farm earnings, which have helped the farm sector in many regions to withstand the residential housing downturn. Historically low interest rates are likely a significant contributor to farming's current ability to support higher land values. About 40 percent of U.S. farmland has been rented over the last 25 years. Non-operators (landowners who do not themselves farm) owned 29 percent of land in farms in 2007, though that proportion has declined since 1992.