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Biofuel and Food-Commodity Prices

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Author Info

  • Gal Hochman

    ()
    (Department of Agriculture, Food, and Resource Economics, Rutgers University, 55 Dudley Rd., New Brunswick, NJ 08901, USA)

  • Scott Kaplan

    ()
    (Department of Agriculture and Resource Economics, University of California Berkeley, 207 Giannini Hall, Berkeley, CA 94720, USA)

  • Deepak Rajagopal

    ()
    (Institute of Environment, University of California Los-Angeles, La Kretz Hall, Suite 300, Los Angeles, CA 90095, USA)

  • David Zilberman

    ()
    (Department of Agriculture and Resource Economics, University of California Berkeley, 207 Giannini Hall, Berkeley, CA 94720, USA)

Abstract

The paper summarizes key findings of alternative lines of research on the relationship between food and fuel markets, and identifies gaps between two bodies of literature: one that investigates the relationship between food and fuel prices, and another that investigates the impact of the introduction of biofuels on commodity-food prices. The former body of literature suggests that biofuel prices do not affect food-commodity prices, but the latter suggests it does. We try to explain this gap, and then show that although biofuel was an important contributor to the recent food-price inflation of 2001–2008, its effect on food-commodity prices declined after the recession of 2008/09. We also show that the introduction of cross-price elasticity is important when explaining soybean price, but less so when explaining corn prices.

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Bibliographic Info

Article provided by MDPI, Open Access Journal in its journal Agriculture.

Volume (Year): 2 (2012)
Issue (Month): 3 (September)
Pages: 272-281

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Handle: RePEc:gam:jagris:v:2:y:2012:i:3:p:272-281:d:20270

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Related research

Keywords: biofuels; commodity-food prices; economic growth; energy prices; exchange rate;

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References

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  1. Chakravorty, Ujjayant & Hubert, Marie-Hélène & Moreaux, Michel & Nostbakken, Linda, 2010. "Will Biofuel Mandates Raise Food Prices?," LERNA Working Papers 10.20.326, LERNA, University of Toulouse.
  2. Hochman Gal & Sexton Steven E & Zilberman David D, 2008. "The Economics of Biofuel Policy and Biotechnology," Journal of Agricultural & Food Industrial Organization, De Gruyter, vol. 6(2), pages 1-24, December.
  3. David Zilberman & Gal Hochman & Deepak Rajagopal & Steve Sexton & Govinda Timilsina, 2013. "The Impact of Biofuels on Commodity Food Prices: Assessment of Findings," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 95(2), pages 275-281.
  4. David M Arseneau & Sylvain Leduc, 2013. "Commodity Price Movements in a General Equilibrium Model of Storage," IMF Economic Review, Palgrave Macmillan, vol. 61(1), pages 199-224, April.
  5. Serra, Teresa & Zilberman, David, 2009. "Price volatility in ethanol markets," 2009 Conference, August 16-22, 2009, Beijing, China 49940, International Association of Agricultural Economists.
  6. Thaeripour, Farzad & Hertel, Thomas W. & Tyner, Wallace E. & Beckman, Jayson F. & Birur, Dileep K., 2008. "Biofuels and their By-Products: Global Economic and Environmental Implications," 2008 Annual Meeting, July 27-29, 2008, Orlando, Florida 6452, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
  7. Xiaoguang Chen & Haixiao Huang & Madhu Khanna & Hayri Önal, 2011. "Meeting the Mandate for Biofuels: Implications for Land Use, Food, and Fuel Prices," NBER Chapters, in: The Intended and Unintended Effects of U.S. Agricultural and Biotechnology Policies, pages 223-267 National Bureau of Economic Research, Inc.
  8. Zhang, Zibin & Lohr, Luanne & Escalante, Cesar & Wetzstein, Michael, 2010. "Food versus fuel: What do prices tell us?," Energy Policy, Elsevier, vol. 38(1), pages 445-451, January.
  9. Hochman, Gal & Rajagopal, Deepak & Timilsina, Govinda & Zilberman, David, 2011. "The role of inventory adjustments in quantifying factors causing food price inflation," Policy Research Working Paper Series 5744, The World Bank.
  10. Mitchell, Donald, 2008. "A note on rising food prices," Policy Research Working Paper Series 4682, The World Bank.
  11. Ujjayant Chakravorty & Marie-Hélène Hubert & Michel Moreaux & Linda Nøstbakken, 2012. "Do Biofuel Mandates Raise Food Prices?," Economics Working Paper Archive (University of Rennes 1 & University of Caen) 201214, Center for Research in Economics and Management (CREM), University of Rennes 1, University of Caen and CNRS.
  12. Lihong Lu McPhail & Bruce A. Babcock, 2008. "Ethanol, Mandates, and Drought: Insights from a Stochastic Equilibrium Model of the U.S. Corn Market," Center for Agricultural and Rural Development (CARD) Publications 08-wp464, Center for Agricultural and Rural Development (CARD) at Iowa State University.
  13. Wetzstein, M. & Wetzstein, H., 2011. "Four myths surrounding U.S. biofuels," Energy Policy, Elsevier, vol. 39(7), pages 4308-4312, July.
  14. McPhail, Lihong Lu, 2011. "Assessing the impact of US ethanol on fossil fuel markets: A structural VAR approach," Energy Economics, Elsevier, vol. 33(6), pages 1177-1185.
  15. Teresa Serra & David Zilberman & José M. Gil & Barry K. Goodwin, 2011. "Nonlinearities in the U.S. corn‐ethanol‐oil‐gasoline price system," Agricultural Economics, International Association of Agricultural Economists, vol. 42(1), pages 35-45, 01.
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Citations

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Cited by:
  1. Lukas Vacha & Karel Janda & Ladislav Kristoufek & David Zilbermand, 2013. "Time-Frequency Dynamics of Biofuels-Fuels-Food System," CAMA Working Papers 2013-27, Centre for Applied Macroeconomic Analysis, Crawford School of Public Policy, The Australian National University.
  2. Hao, Na & Colson, Gregory & Karali, Berna & Wetzstein, Michael E., 2013. "Food before Biodiesel Fuel?," 2013 Annual Meeting, February 2-5, 2013, Orlando, Florida 143078, Southern Agricultural Economics Association.
  3. Leucci, A. C. & Ghinoi, S. & Sgargi, D. & Wesz, V. J., Jr., 2013. "Variation and links among food and energy international prices. An analysis through VAR models from 2000 to 2012," 2013 Second Congress, June 6-7, 2013, Parma, Italy 149923, Italian Association of Agricultural and Applied Economics (AIEAA).

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