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Straining the links between biofuel policies and food insecurity in developing countries. Wyatt Thompson and Ignacio Pérez Domínguez 17 th ICABR Conference, 19 th June 2013, Ravello (Italy). Introduction. Fuel versus food debate:

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straining the links between biofuel policies and food insecurity in developing countries

Straining the links between biofuel policies and food insecurity in developing countries

Wyatt Thompson and Ignacio Pérez Domínguez

17th ICABR Conference, 19th June 2013, Ravello (Italy)

introduction
Introduction
  • Fuel versus food debate:
    • concern about the agricultural commodities used for biofuel production causing food insecurity in developing countries
    • one-for-one as the extreme case
  • Need for a more nuanced view:
    • Biofuel expansion not only driven by policies but also by price increases of crude oil
    • Domestic and international markets have different links  price elasticities have a relevant effect
  • This paper tries to decompose the link between a biofuel policy in a developed country (US) and food use in a group of developing countries (Africa and Asia least developed)

OECD Trade and Agriculture Directorate

steps from a biofuel demand shock in a dvd country to food use in dvg s
Steps from a biofuel demand shock in a DVD country to food use in DVG’s

Reduction in corn imports (developing)

Increase in US corn use for ethanol

Increase in US biofuel mandate (scenario shock)

Reduction in corn use for food (developing)

Reduction in corn exports (US)

OECD Trade and Agriculture Directorate

methods and data aglink cosimo model
Methods and Data: Aglink-Cosimo Model
  • Partial equilibrium model: agriculture, fish/seafood and biofuels
  • Co-developed by the OECD (Aglink) and the FAO (Cosimo)
  • Net trade model for representative commodities, world coverage
  • Model release linked to the yearly OECD-FAO publication on medium-term projections for agricultural markets (2013-2022 last week in Beijing)
  • Data coming from experts (country questionnaires and FAO databases)
  • Detailed biofuel module for the major producers: US, EU, Brazil (see next presentation)

OECD Trade and Agriculture Directorate

baseline projections coarse grain per capita food use in 2022 kg person year
Baseline projections: coarse grain per capita food use (in 2022, kg/person/year)
  • High consumption of coarse grains by African and Latin-American countries
baseline projections veg oils per capita food use in 2022 kg person year
Baseline projections: veg. oils per capita food use (in 2022, kg/person/year)
  • High consumption of vegetable oils by Asian and Latin-American countries
scenario a higher fulfillment of the us renewable fuel standard rfs
Scenario: a higher fulfillment of the US Renewable Fuel Standard (RFS)
  • What does this mean?
    • Higher mandated biofuel blending in the US
    • Lower than mandated cellulosic production (waiver)  mandate waived but not as low as in the baseline, 5 billion additional liters
  • Implications
    • Greater demand for conventional biofuel feedstocks in the US: maize for ethanol and vegetable oils for biodiesel
    • More biofuel production
    • Higher feedstock prices and less exports from the US
    • Small effects on developing countries
how to identify the weakest link
How to identify the weakest link?
  • Objective: trace the impacts from biofuel mandate to food use in developing country by identifying the transmission of impacts at each key step
  • Method: push the shock further along in steps

1) RFS increase only (already seen)

2) #1 + shock on US demand for feedstocks for biofuel

3) #2 + shock on US exports of feedstocks

4) #3 + shock on developing country imports of feedstocks

5) #4 + shock on developing country food use of feedstocks

  • Intuition: go from estimated impact to automatic 1-for-1 substitution to see differences
slide12
Coarse grain and vegetable oils used for biofuel in the USchange from baseline, million metric tonnes
slide15
Coarse grain and vegetable oils imports in least developed countrieschange from baseline, million tonnes
slide16
Coarse grain and vegetable oils food demand in least developed countrieschange from baseline, million tonnes
impact ratios
Impact ratios

Ratio : developing country food use impact / divided by intitial shock in feedstock equivalent

Demonstrates: weakness of links after each stage

Cases :

Ratio = 0  no net effect

Ratio = -1  a one-for-one trade off

Ratio > 0  cross-commodity effects play a role

conclusions
Conclusions
  • The scenarios reveal how expectations of agricultural economists differ from the implicit assumption underlying popular beliefs  the impact of a relatively large shock on biofuel demand for coarse grains and vegetable oils by a major producer, such as the US, on food demand in least developed countries is found to be very small.
  • The impacts are mostly dampened through substitution in trade and domestic markets.
  • Negative calorie consumption effects in developing countries are present once the shock reaches the importing sector of biofuel feedstock commodities.
  • Further research needed to expand the exercise to other major biofuel producers and perform sensitivity analysis
discussion
Discussion

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