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Land Allocation Effects of the Global Ethanol Surge: Predictions from the International FAPRI Model

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Author Info
Jacinto F. Fabiosa () (Center for Agricultural and Rural Development (CARD), Food and Agricultural Policy Research Institute (FAPRI))
John C. Beghin
Fengxia Dong () (Center for Agricultural and Rural Development (CARD), Food and Agricultural Policy Research Institute (FAPRI))
Amani Elobeid () (Center for Agricultural and Rural Development (CARD), Food and Agricultural Policy Research Institute (FAPRI))
Simla Tokgoz
Tun-Hsiang (Edward) Yu

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Abstract

We quantify the emergence of biofuel markets and its impact on U.S. and world agriculture for the coming decade using the multi-market, multi-commodity international FAPRI (Food and Agricultural Policy Research Institute) model. The model incorporates the trade-offs between biofuel, feed, and food production and consumption and international feedback effects of the emergence through world commodity prices and trade. We examine land allocation by type of crop, and pasture use for countries growing feedstock for ethanol (corn, sorghum, wheat, sugarcane, and other grains) and major crops competing with feedstock for land resources such as oilseeds. We shock the model with exogenous changes in ethanol demand, first in the United States, then in Brazil, China, the European Union-25, and India, and compute shock multipliers for land allocation decisions for crops and countries of interest. The multipliers show at the margin how sensitive land allocation is to the growing demand for ethanol. Land moves away from major crops and pasture competing for resources with feedstock crops. Because of the high U.S. tariff on ethanol, higher U.S. demand for ethanol translates into a U.S. ethanol production expansion. The latter has global effects on land allocation as higher coarse grain prices transmit worldwide. Changes in U.S. coarse grain prices also affect U.S. wheat and oilseed prices, which are all transmitted to world markets. In contrast, expansion in Brazil ethanol use and production chiefly affects land used for sugarcane production in Brazil and to a lesser extent in other sugar-producing countries, but with small impacts on other land uses in most countries.

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Publisher Info
Paper provided by Food and Agricultural Policy Research Institute (FAPRI) at Iowa State University in its series Food and Agricultural Policy Research Institute (FAPRI) Publications with number 09-wp488.

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Date of creation: Mar 2009
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Handle: RePEc:ias:fpaper:09-wp488

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Web page: http://www.fapri.iastate.edu/
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Related research
Keywords: acreage; area; biofuel; corn; crops; ethanol; FAPRI model; feedstock; land; sugar; sugarcane. JEL Code: Q42; Q17; Q18; Q15;

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  3. Hallam, A. & Anderson, I. C. & Buxton, Dr. R., 2002. "Comparative Economic Analysis of Perennial, Annual and Intercrops for Biomass Production," Staff General Research Papers 5076, Iowa State University, Department of Economics.
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  6. Simla Tokgoz & Amani Elobeid, 2006. "Analysis of the Link between Ethanol, Energy, and Crop Markets, An," Food and Agricultural Policy Research Institute (FAPRI) Publications 06-wp435, Food and Agricultural Policy Research Institute (FAPRI) at Iowa State University. [Downloadable!]
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  7. Amani Elobeid & Simla Tokgoz, 2006. "Removal of U.S. Ethanol Domestic and Trade Distortions: Impact on U.S. and Brazilian Ethanol Markets," Food and Agricultural Policy Research Institute (FAPRI) Publications 06-wp427, Food and Agricultural Policy Research Institute (FAPRI) at Iowa State University. [Downloadable!]
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  8. English, Burton C. & De La Torre Ugarte, Daniel G. & Walsh, Marie E. & Hellwinkel, Chad & Menard, Jamey, 2006. "Economic Competitiveness of Bioenergy Production and Effects on Agriculture of the Southern Region," Journal of Agricultural and Applied Economics, Southern Agricultural Economics Association, vol. 38(02), August. [Downloadable!]
  9. Elobeid, Amani & Tokgoz, Simla & Hayes, Dermot J. & Babcock, Bruce A. & Hart, Chad E., 2006. "Long-Run Impact of Corn-Based Ethanol on the Grain, Oilseed, and Livestock Sectors: A Preliminary Assessment, The," Staff General Research Papers 12692, Iowa State University, Department of Economics. [Downloadable!]
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  10. Simla Tokgoz & Amani Elobeid & Jacinto F. Fabiosa & Dermot J. Hayes & Bruce A. Babcock & Tun-Hsiang (Edward) Yu & Fengxia Dong & Chad E. Hart & John C. Beghin, 2007. "Emerging Biofuels: Outlook of Effects on U.S. Grain, Oilseed, and Livestock Markets," Center for Agricultural and Rural Development (CARD) Publications 07-sr101, Center for Agricultural and Rural Development (CARD) at Iowa State University. [Downloadable!]
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  11. Uwe Schneider & Bruce McCarl, 2003. "Economic Potential of Biomass Based Fuels for Greenhouse Gas Emission Mitigation," Environmental & Resource Economics, European Association of Environmental and Resource Economists, vol. 24(4), pages 291-312, April. [Downloadable!] (restricted)
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  12. Gallagher, Paul W. & Shapouri, Hosein & Price, Jeffrey & Schamel, Guenter & Brubaker, Heather, 2003. "Some long-run effects of growing markets and renewable fuel standards on additives markets and the US ethanol industry," Journal of Policy Modeling, Elsevier, vol. 25(6-7), pages 585-608, September. [Downloadable!] (restricted)
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