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

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  • Fabiosa, Jacinto F.
  • Beghin, John C.
  • Dong, Fengxia
  • Elobeid, Amani
  • Tokgoz, Simla
  • Yu, Tun-Hsiang

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 model. The model incorporates the tradeoffs 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, EU, 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 grains prices transmit worldwide. Changes in U.S. coarse grain prices also affect U.S. wheat and oilseeds 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 impact on other land uses in most countries. Keywords: Acreage, area, biofuel, corn, crops, ethanol, FAPRI model, feedstock, land, sugar, sugarcane. JEL Code: Q42 Q17 Q15

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Bibliographic Info

Paper provided by Iowa State University, Department of Economics in its series Staff General Research Papers with number 12877.

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Date of creation: 03 Mar 2009
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Handle: RePEc:isu:genres:12877

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Postal: Iowa State University, Dept. of Economics, 260 Heady Hall, Ames, IA 50011-1070
Phone: +1 515.294.6741
Fax: +1 515.294.0221
Email:
Web page: http://www.econ.iastate.edu
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Keywords: ethanol; acreage; area; biofuel; corn; crops; FAPRI model; feedstock; land; sugar; sugarcane;

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References

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  1. Torre Ugarte, Daniel de la & Walsh, Marie E. & Shapouri, Hosein & Slinsky, Stephen P., 2003. "The Economic Impacts of Bioenergy Crop Production on U.S. Crop Production," Agricultural Economics Reports 33997, United States Department of Agriculture, Economic Research Service.
  2. Elobeid, Amani & Tokgoz, Simla & Hayes, Dermot J. & Babcock, Bruce A. & Hart, Chad E., 2007. "Long-Run Impact of Corn-Based Ethanol on the Grain, Oilseed, and Livestock Sectors: A Preliminary Assessment, The," Staff General Research Papers 12717, Iowa State University, Department of Economics.
  3. David Pearce, 2003. "The Social Cost of Carbon and its Policy Implications," Oxford Review of Economic Policy, Oxford University Press, vol. 19(3), pages 362-384.
  4. Amani Elobeid & Simla Tokgoz, 2006. "Removal of U.S. Ethanol Domestic and Trade Distortions: Impact on U.S. and Brazilian Ethanol Markets," Center for Agricultural and Rural Development (CARD) Publications 06-wp427, Center for Agricultural and Rural Development (CARD) at Iowa State University.
  5. Beghin, John C. & Dong, Fengxia & Elobeid, Amani E. & Fabiosa, Jacinto F. & Fuller, Frank H. & Hart, Chad E. & Kovacik, Karen & Matthey, Holger & Saak, Alexander E. & Tokgoz, Simla & Chavez, Eddie C. , 2004. "FAPRI 2004 U.S. and World Agricultural Outlook," Staff Reports 32046, Food and Agricultural Policy Research Institute (FAPRI).
  6. Hallam, Arne & Anderson, I. C. & Buxton, D. R., 2001. "Comparative Economic Analysis of Perennial, Annual and Intercrops for Biomass Production," Staff General Research Papers 5076, Iowa State University, Department of Economics.
  7. Beghin, John C. & Dong, Fengxia & Elobeid, Amani & Fabiosa, Jacinto F. & Fuller, Frank H. & Hart, Chad E. & Kovarik, Karen P. & Tokgoz, Simla & Yu, Tun-Hsiang & Wailes, Eric J. & Chavez, Edward & Woma, 2007. "FAPRI 2007 U.S. And World Agricultural Outlook," Staff General Research Papers 12805, Iowa State University, Department of Economics.
    • Beghin, John C. & Dong, Fengxia & Elobeid, Amani E. & Fabiosa, Jacinto F. & Fuller, Frank H. & Hart, Chad E. & Kovarik, Karen & Tokgoz, Simla & Yu, Tun-Hsiang (Edward) & Wailes, Eric J. & Chavez, Eddi, 2007. "FAPRI 2007 U.S. and World Agricultural Outlook," Staff Reports 7296, Food and Agricultural Policy Research Institute (FAPRI).
  8. Gallagher, Paul W. & Otto, Daniel & Dikeman, Mike, 2000. "Effects of an Oxygen Requirement for Fuel in Midwest Ethanol Markets and Local Economies," Staff General Research Papers 5244, Iowa State University, Department of Economics.
  9. English, Burton C. & Torre Ugarte, Daniel de la & Walsh, Marie E. & Hellwinckel, Chad M. & Menard, R. 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.
  10. Simla Tokgoz & Amani Elobeid, 2006. "Analysis of the Link between Ethanol, Energy, and Crop Markets, An," Center for Agricultural and Rural Development (CARD) Publications 06-wp435, Center for Agricultural and Rural Development (CARD) at Iowa State University.
  11. 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," Food and Agricultural Policy Research Institute (FAPRI) Publications 07-sr101, Food and Agricultural Policy Research Institute (FAPRI) at Iowa State University.
  12. 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.
  13. Silvia Secchi & Bruce A. Babcock, 2007. "Impact of High Crop Prices on Environmental Quality: A Case of Iowa and the Conservation Reserve Program," Center for Agricultural and Rural Development (CARD) Publications 07-wp447, Center for Agricultural and Rural Development (CARD) at Iowa State University.
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Citations

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Cited by:
  1. Okwo, Adaora & Thomas, Valerie M., 2014. "Biomass feedstock contracts: Role of land quality and yield variability in near term feasibility," Energy Economics, Elsevier, vol. 42(C), pages 67-80.
  2. Castro, Eduardo Rodrigues de & Teixeira, Erly Cardoso & Valdes, Constanza, 2012. "Sugar Cane Expansion: Does It Contribute To Amazon Deforestation?," 2012 Conference, August 18-24, 2012, Foz do Iguacu, Brazil 131703, International Association of Agricultural Economists.
  3. Jerome Dumortier & Dermot J. Hayes & Miguel Carriquiry & Fengxia Dong & Xiaodong Du & Amani Elobeid & Jacinto F. Fabiosa & Kranti Mulik, 2010. "Modeling the Effects of Pasture Expansion on Emissions from Land-Use Change," Food and Agricultural Policy Research Institute (FAPRI) Publications 10-wp504, Food and Agricultural Policy Research Institute (FAPRI) at Iowa State University.
  4. Fabiosa, Jacinto F. & Beghin, John C. & Dong, Fengxia & Elobeid, Amani & Tokgoz, Simla & Yu, Tun-Hsiang, 2010. "The Global Bioenergy Expansion: How Large Are the Food−Fuel Trade-Offs?," Staff General Research Papers 31603, Iowa State University, Department of Economics.
  5. Sobowale, Flakkeh & Dicks, Michael R. & Adam, Brian D. & Campiche, Jody L., 2012. "Impact of United States Corn-Based Ethanol Production on Land Use," 2012 Annual Meeting, February 4-7, 2012, Birmingham, Alabama 119800, Southern Agricultural Economics Association.
  6. Hertel, Thomas & Jevgenijs Steinbuks & Uris Lantz Baldos, 2012. "Competition for Land in the Global Bioeconomy," GTAP Working Papers 3982, Center for Global Trade Analysis, Department of Agricultural Economics, Purdue University.
  7. Sobowale, Folakemi & Dicks, Michael R. & Campiche, Jody L., 2011. "Impact of United States Corn-based Ethanol Production on Land Use," 2011 Annual Meeting, February 5-8, 2011, Corpus Christi, Texas 98854, Southern Agricultural Economics Association.
  8. repec:ags:iaae12:126735 is not listed on IDEAS
  9. Brown, Jesslyn F. & Pervez, Md Shahriar, 2014. "Merging remote sensing data and national agricultural statistics to model change in irrigated agriculture," Agricultural Systems, Elsevier, vol. 127(C), pages 28-40.
  10. Jane, Harrigan, 2011. "Food Security in the Middle East and North Africa (MENA) and sub-Saharan Africa: A Comparative Analysis," CEI Working Paper Series 2011-5, Center for Economic Institutions, Institute of Economic Research, Hitotsubashi University.

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