Last updated on June 9, 2012
In a new survey article in the American Journal of Agricultural Economics, David Zilberman and his coauthors look at the relationship between biofuels and food prices:
[W] e conclude that introduction of biofuel may affect food prices but the impact varies across crops and locations. Furthermore, we found that the introduction of biofuel has a lower impact on food-commodity prices when biofuel production is not competing with food crops for resources, such as land and water. Thus, the expansion of sugarcane ethanol in Brazil and second-generation biofuels grown on nonagricultural lands are likely to have a much smaller impact on food prices than the expansion of corn ethanol. We further argue that the introduction of corn ethanol has had a significant impact on food commodity prices, but it is less substantial than the impact of economic growth and approximately of the same order of magnitude, though in the opposite direction, as the impact of the introduction of GM organisms.
Now, this is based in simulation analysis and economic theory, so it is not possible to make causal claims here.
But this is an interesting set of results in that it suggests that the impact of the growing demand for food due to increased incomes is more important than the impact of biofuels when it comes to food prices.
This is especially interesting when contrasted with the findings in the article I discussed yesterday, which concluded that China’s economic growth since 1995 has only had a weak effect on food prices.