Lit in Review: Biofuels

Review of Agricultural Economics, Vol. 30, No. 4, Winter 2008

Tokgoz, Elobeid, Fabiosa, Hayes, Babcock, Yu, Dong, and Hart, "Bottlenecks, Drought and Oil Price Spikes: Impact on US Ethanol and Agricultural Sectors."
Method: Calibrated model (2006) of supply and demand for temperate ag products, multi-country, partial-eq. Projections 2007 and 2016.
Baseline projections: Ethanol demand is the limiting factor to its growth, selling at a wholesale discount of $0.13/gallon below its energy value relative to gas. Ethanol plants cover their variable costs, but not full costs. Soybean production shifts from US to S. America.
If oil prices are $10/barrel higher than baseline, ethanol production increases 55%, corn price increases 20%, US grain exports decrease between 12% and 30%. Livestock feed costs increase 13.4% so pork prices increase 1.5% at retail, decreasing US pork consumption 0.6% and exports 6.2%. Other livestock markets respond similarly. Worldwide meat consumption decreases, with US pork exports decreasing and beef exports increasing because the price increase affecting all meats lowers the relative price of beef. The effect on total food prices is 1%.
If a major drought occurs in 2012 with given mandates: corn prices rise 44% and soybean 22%; US corn exports decrease more than 60%, offset partially by increases from S. America, China, and other countries. Broiler production decreases 2.7%, egg prices increase 11%, broiler prices increase 10%. Herd sizes adjust only a little because the price shock is expected to be temporary.

Gohin, "Impacts of the European Biofuel Policy on the Farm Sector: A General Equilibrium Assessment" ungated version.
Method: Computable general equilibrium model, simulations, uncertain what data years are used
Findings: Compared to a baseline, the EU governments enact tax and mandate policies to guarantee 13.8 Mote of biofuels in 2015. Biodiesel will be supplied largely by imports and bioethanol by EU production because bioethanol faces high import taxes. The increase in the price of vegetable oils leads to an increased demand for animal fat and other animal byproducts, so livestock production remains relatively constant, meat prices decrease slightly so more is consumed. Farm incomes increase significantly, but less than EC estimates. Rapeseed oil and sunflower sectors expand significantly.




Wilson, Koo, Dahl, and Taylor, "Impacts of Ethanol Expansion on Cropping Patterns and Grain Flows" ungated version.
Method: large-scale (12,979 variables) non-linear spatial partial optimization model, data calibrated to 2000-2004, projected 2010, 2020, 2030, and 2040
Findings: In the case of high ethanol demand: world exports increase from 263mmt to 406; US total grain exports increase until 2020 then decreases to 90% of base; Canada increases 50%, Brazil doubles exports, Argentina and Australia nearly double exports, E. European exports treble.

Petrolia, "An Analysis of the Relationship between Demand for Corn Stover as an Ethanol Feedstock and Soil Erosion."
Corn stover (cobs, stalks, and leaves) provide organic fertilization when left on the farm or can be used as biomass to produce biofuels. In southern Minnesota, replacing the soil nutrients (phosphate and potash) lost from one ton of corn stover would cost $4.76. Different numbers of biomass plants can be supported depending on how efficiently stover is harvested (40-90%). For a given level of efficiency, the price of stover increases slowly until a threshold is reached (8-10 for 40%, 10-12 for 50%, 15-18 for 80+%) at which point the price shoots up. Thus, "even under current tillage practices, there will be little to no incentive to violate erosion constraints" as long as there aren't too many biomass plants competing for the same stover. If farmers move to no-till practice, the threshold number of plants increases to 19. It is found to be unlikely that corn ethanol prices increase high enough to incentivize the threshold levels of biomass plants.