The role of demand for biofuel in the agricultural commodity price spikes of 2007/08
UK Department for Environment, Food and Rural Affairs
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This paper is part of a larger body of work that aims to shed more light on what led to the high agricultural commodity prices in 2008. The paper first looks at of some of the specifics of agricultural markets and the changes over the last few years in those markets due to biofuels (bioethanol and biodiesel). It goes on to give a brief overview of biofuel policies in the main producer countries. It examines the links between agricultural and energy markets, including economic modelling of the medium-term relationship between the two, and it evaluates the economic viability of biofuel production in the US, taking a case study approach to a specific commodity, namely sugar. The second part of the paper looks at the 2008 price spike including a literature review of biofuel’s impact on the recent agricultural price increases and draws conclusions based on the arguments surrounding biofuel’s contribution to the price spike in 2008. Specifically this paper sets out to address the following question: To what extent did the use of grains/oilseeds for biofuel production (policy driven or not) play a role in the price spikes of 2008?
Added on 19 May 2010
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