Straining the links between biofuel policies and food insecurity in developing countries
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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)
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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: - PowerPoint PPT Presentation
Transcript of 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)
OECD Trade and Agriculture Directorate 2
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 3
Steps from a biofuel demand shock in a DVD country to food use in DVG’s
Increase in US biofuel mandate (scenario shock)
Increase in US corn use for ethanol
Reduction in corn exports (US)
Reduction in corn imports (developing)
Reduction in corn use for food (developing)
OECD Trade and Agriculture Directorate 4
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)
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)
• High consumption of vegetable oils by Asian and Latin-American countries
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
Impacts on grain markets
Baseline Scenario Absolute change Percent change
USA biofuel use of coarse grain
150 mt 152 mt +2 mt +1.3%
USA coarse grain producer price
228.4 usd/t 229.7 usd/t +1.3 usd/t +0.6%
USA net coarse grain exports
61 mt 60 mt -1 mt -1.8%
Developing country net coarse grain imports
17.9 mt 17.8 mt -0.1 mt -0.5%
Developing country coarse grain food use
52.0 mt 52.0 mt 0.0 mt 0.0%
Impacts on vegetable oil markets
Baseline Scenario Absolute change Percent change
USA biofuel use of vegetable oil 3.2 mt 3.4 mt +0.2 mt 7.4%USA vegetable oil producer price 1009 usd/t 1010 usd/t +1 mt 0.1%USA net vegetable oil exports 1.6 mt 1.5 mt -0.1 mt -4.0%Developing country net vegetable oil imports 7.2 mt 7.2 mt 0 -0.1%Developing country vegetable oil food use 11.8 mt 12 mt 0 0.0%
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 steps1) RFS increase only (already seen)2) #1 + shock on US demand for feedstocks for biofuel3) #2 + shock on US exports of feedstocks4) #3 + shock on developing country imports of feedstocks5) #4 + shock on developing country food use of feedstocks
• Intuition: go from estimated impact to automatic 1-for-1 substitution to see differences
Example: steps for coarse grains
Step 1 Step 2 Step 3 Step 4 Step 5
Renewable Fuel Standard program
Increased by the amount of shock
Increased by the amount of shock
Increased by the amount of shock
Increased by the amount of shock
Increased by the amount of shock
USA biofuel coarse grain use
Rises in response to shock
Increased by the amount of shock
Increased by the amount of shock
Increased by the amount of shock
Increased by the amount of shock
USA coarse grain exports
Falls due to price effect
Falls due to price effect
Decreased by the amount of shock
Decreased by the amount of shock
Decreased by the amount of shock
Developing countries coarse grain net imports
Falls due to price effect
Falls due to price effect
Falls due to price effect
Decreased by the amount of shock
Decreased by the amount of shock
Developing countries coarse grain food use
Falls due to price effect
Falls due to price effect
Falls due to price effect
Falls due to price effect
Decreased by the amount of shock
Coarse grain and vegetable oils used for biofuel in the USchange from baseline, million metric tonnes
Step 1:
RFS on
ly
Step 2:
+Biof
uel U
se
Step 3:
+Exp
orts
Step 4:
+DC im
ports
Step 5:
+DC fo
od0.0
0.5
1.0
1.5
2.0
2.5
Coarse grain and vegetable oils production in the USchange from baseline, million metric tonnes
Step 1:
RFS on
ly
Step 2:
+Biof
uel U
se
Step 3:
+Exp
orts
Step 4:
+DC im
ports
Step 5:
+DC fo
od-0.4-0.3-0.2-0.10.00.10.20.30.40.5
Coarse grain and vegetable oils exports from the USchange from baseline, million tonnes
Step 1:
RFS on
ly
Step 2:
+Biof
uel U
se
Step 3:
+Exp
orts
Step 4:
+DC im
ports
Step 5:
+DC fo
od-2.5
-2.0
-1.5
-1.0
-0.5
0.0
Coarse grain and vegetable oils imports in least developed countrieschange from baseline, million tonnes
Step 1:
RFS on
ly
Step 2:
+Biof
uel U
se
Step 3:
+Exp
orts
Step 4:
+DC im
ports
Step 5:
+DC fo
od-2.5
-2.0
-1.5
-1.0
-0.5
0.0
Coarse grain and vegetable oils food demand in least developed countrieschange from baseline, million tonnes
Step 1:
RFS on
ly
Step 2:
+Biof
uel U
se
Step 3:
+Exp
orts
Step 4:
+DC im
ports
Step 5:
+DC fo
od-2.5
-2.0
-1.5
-1.0
-0.5
0.0
0.5
Coarse grain Vegetable oil
Step 1
Step 2
Step 3
Step 4
Step 5
-1 -0.8 -0.6 -0.4 -0.2 0 0.2 0.4 0.6 0.8 1
0.00
0.00
-0.01
-0.12
-1.00
0.02
0.02
0.02
-0.03
-1.00
Vegetable oil Coarse grain
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 effectRatio = -1 a one-for-one trade offRatio > 0 cross-commodity effects play a role
Impact ratios
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
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Discussion
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