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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 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.