Seth Meyer

Demand Behavior and Commodity Price Volatility Under Evolving Biofuel Markets and Policies

Rising petroleum prices, growing incomes in developing nations, and changes in energy policy around the world are having a significant effect on agricultural markets as biofuels begin to play a more substantial role in meeting the world’s energy needs. Some see biofuels as a means to reduce carbon emissions, increase energy independence, and raise farm income. Others note that the new demand for commodities to produce biofuels can lead to higher food prices, potentially undermining food security, and bring about unintended environmental consequences from expanding crop acreage that may result in greater carbon emissions. While there are a large number of studies that examine the influence of biofuels and biofuel policy on the prices of agricultural commodities, one poorly understood impact of greater biofuel production is how these changes have affected commodity price volatility. Price volatility is important for food security, farm income, policy formation, and investment behavior. We examine how greater biofuel production, whether motivated by policy or market prices, might change commodity price volatility in the future.

Impacts of water cycle changes on the rice market in Cambodia: stochastic supply and demand model analysis

A supply and demand model for rice in Cambodia, which includes among other factors evapotranspiration as a water supply variable impacting regional yields and planted areas, is developed to aid in the design of agricultural policies and planning. Impacts are determined stochastically by drawing on water cycle distributions and evaluating the resulting variation in production and price bands for local rice markets. The results of the baseline analyses indicate that production of wet and dry season rice steadily increases and the consumption per capita slightly decreases due to the negative income elasticity. Results of a partial stochastic analyses show that the production of rice in regions where elevations are high and the land vulnerable to flooding are the most sensitive to increased fluctuations in water supply. The changes also affect the rice market through equilibrium price changes. The upper price band, which is the width between average and 90th percentile, is larger than the lower band, which is the width between average and tenth percentile, suggesting that the situation of low income consumers could grow worse under an unstable environment with relatively larger upward price spikes. The results imply that development of irrigation facilities and water management systems maybe required for Cambodian provinces which rely heavily on agriculture, particularly rice production, under increasing climatic variation.

New Uncertainties in Land Use Changes Caused by the Production of Biofuels

The environmental benefits of biofuels continue to be debated. Recent attention focuses on biofuel-induced land use changes and their impact on greenhouse gas emissions. We develop an international, multi-commodity, partial equilibrium model and measure the impact of US and EU biofuel production on land use as well as the associated greenhouse gas emissions. We find these measures to be sensitive to changes in assumptions, specifically relating to yields. We note the possibility of offsetting cross-commodity effects. We identify the context and time path as previously unrecognized sources of variation and potential error in greenhouse gas calculations.