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The impact of biofuel demand on agricultural commodity prices: a systematic review

The impact of biofuel demand on agricultural commodity prices: a systematic review By diverting agricultural land away from food, feed, and livestock production, increased production of biofuel feedstock crops tend to drive up prices for agricultural commodities. But by how much? This question has been heavily debated in recent years, following the food price crisis of 2007–2008. A systematic review of 121 studies that quantifies the impact of biofuel demand on agricultural commodity markets reveals that there is still considerable uncertainty around the exact magnitude of the price response. Increased demand for corn ethanol in the United States—the focus of the majority of studies—is estimated to have accounted for 14–43% of the rise in US corn prices in the period 2000–2008. The divergence in results between studies is mainly due to different assumptions regarding demand and supply elasticities for agricultural commodities, and there is very limited empirical evidence that can help reduce the uncertainty around the value of these parameters, especially outside the United States. Few studies analyze the impact of biofuel demand beyond current or near‐future levels and it is argued that estimated price effects can neither be extrapolated to large‐scale biofuel demand shocks, nor are most models able to capture accurately the impacts of such shocks due to weaknesses in how land markets and land transformation process are modeled. To better gauge current and future impacts of biofuel demand on agricultural commodity markets, we need better data on supply and demand responses, both in the short and long run, as well as improved modeling of land competition and land‐use change. WIREs Energy Environ 2015, 4:410–428. doi: 10.1002/wene.155 For further resources related to this article, please visit the WIREs website. Conflict of interest: The authors have declared no conflicts of interest for this article. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Wiley Interdisciplinary Reviews: Energy and Environment Wiley

The impact of biofuel demand on agricultural commodity prices: a systematic review

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References (79)

Publisher
Wiley
Copyright
© 2015 John Wiley & Sons, Ltd.
ISSN
2041-8396
eISSN
2041-840X
DOI
10.1002/wene.155
Publisher site
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Abstract

By diverting agricultural land away from food, feed, and livestock production, increased production of biofuel feedstock crops tend to drive up prices for agricultural commodities. But by how much? This question has been heavily debated in recent years, following the food price crisis of 2007–2008. A systematic review of 121 studies that quantifies the impact of biofuel demand on agricultural commodity markets reveals that there is still considerable uncertainty around the exact magnitude of the price response. Increased demand for corn ethanol in the United States—the focus of the majority of studies—is estimated to have accounted for 14–43% of the rise in US corn prices in the period 2000–2008. The divergence in results between studies is mainly due to different assumptions regarding demand and supply elasticities for agricultural commodities, and there is very limited empirical evidence that can help reduce the uncertainty around the value of these parameters, especially outside the United States. Few studies analyze the impact of biofuel demand beyond current or near‐future levels and it is argued that estimated price effects can neither be extrapolated to large‐scale biofuel demand shocks, nor are most models able to capture accurately the impacts of such shocks due to weaknesses in how land markets and land transformation process are modeled. To better gauge current and future impacts of biofuel demand on agricultural commodity markets, we need better data on supply and demand responses, both in the short and long run, as well as improved modeling of land competition and land‐use change. WIREs Energy Environ 2015, 4:410–428. doi: 10.1002/wene.155 For further resources related to this article, please visit the WIREs website. Conflict of interest: The authors have declared no conflicts of interest for this article.

Journal

Wiley Interdisciplinary Reviews: Energy and Environment – Wiley

Published: Sep 1, 2015

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