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TitleBiofuels and food security
LanguageEnglish
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Table of Contents
                            Cover
©
Table of Contents
FOREWORD
SUMMARY AND RECOMMENDATIONS
	Summary
	Recommendations
INTRODUCTION
1  BIOFUEL POLICIES
	1.1 The emergence of policy-based biofuel markets –  ethanol in Brazil and the US
	1.2  The entry of the EU and the rise of biodiesel
	1.3  A new impulse to biofuels in the US and Brazil
	1.4  The adoption of policy-promoted biofuel markets worldwide
		1.4.1 Biofuels in China
		1.4.2 Biofuels in India
		1.4.3  Biofuels in other Asian countries
		1.4.4 Biofuels in South Africa
		1.4.5  An emerging biofuels strategy in sub-Saharan Africa
		1.4.6  Biofuels in Latin America
	1.5  EU and US: policies at a turning point?
	1.6  Conclusions
2 BIOFUELS AND THE TECHNOLOGY FRONTIER
	2.1  Biofuel technology trajectories
	2.2  How do technologies matter for the competition for land,  with food and feed?
		2.3.1 Cost-efficiency
		2.3.2 Energy balance
		2.3.3 Greenhouse gas balance
	2.4 The timetable for second-generation biofuels
		2.4.1 Technology trajectories and investments at a crossroad
		2.4.2 Second-generation biofuels versus other forms of bioenergy
		2.4.3  What perspectives for the US, EU, Brazil and other  developing countries?
		2.4.4  Second-generation biofuels: are they an alternative  for developing countries?
	2.5 Conclusions
3  BIOFUELS, FOOD PRICES, HUNGER AND POVERTY
	3.1 Introduction: tackling the “biofuels and food prices”  controversy
	3.2 Basic mechanisms at play between biofuels and food commodity prices
		3.2.1 Feedstock consumption and production feedbacks
		3.2.2  Substitution effects between products, at the demand or  at the supply level, in food and fuel markets
		3.2.3  Potentially differing short-term and long-term feedbacks  and substitution effects
	3.3 State of the literature related to biofuels and food prices
		3.3.1  Linkage of food prices to oil prices via biofuel production  capacities and biofuel demand
		3.3.2  Rising US corn-ethanol demand and related tension  on corn and oilseed markets
		3.3.3 Brazil and sugar-cane ethanol
		3.3.4 Biodiesel and the EU
	3.4  Relative role of biofuels versus other factors  in the 2007/2012 price increases
		3.4.1 Other factors relevant to food price increase in the recent context
		3.4.2 Biofuels can act to amplify the role of other factors in price rise
		3.4.3 Synthesis of main findings and estimates with respect  to the recent commodity price increase
	3.5 Can robust conclusions emerge?
	3.6  Policy implications of fast-changing contexts  for crop-based biofuels
4 BIOFUELS AND LAND
	4.1 The issue of land availability
		4.1.1 “Suitable” land available for crop production
		4.1.2 Global demand for land resulting from projections  of food and feed demand
		4.1.3  Additional land needs in light of envisaged biofuels  and bioenergy goals
	4.2  Biofuels within the “land grab” or “international large-scale land acquisitions” debates
		4.2.1 Data sources on land investments
		4.2.2  Analysis of the evidence provided by the data sources
		4.2.3 Biofuel investments and customary land rights
		4.2.4  Best use of available land? Large-scale versus smallholder strategies
		4.2.5  Consensus on need for institutional reforms on governing land investments
	4.3 Direct, indirect land use change, and competing demands
		4.3.1 Direct and indirect land use change
		4.3.2 The potential of “marginal” and “abandoned” land
		4.3.3  Taking into account multiple functions of land use
5  BIOFUELS AND BIOENERGY: SOCIO-ECONOMIC IMPACTS AND DEVELOPMENT PERSPECTIVES
	5.1  The Brazilian ethanol experience from the perspective  of local and rural development
	5.2  The Brazilian biodiesel programme: an alternative  development strategy?
	5.3  Attempts to evaluate socio-economic implications of biofuels/energy developments in the developing country context
		5.3.1 CGE analyses
		5.3.2 The BEFS methodological toolkit
		5.3.3 The “Biofuels and the poor” project
		5.3.4 Microlevel analysis
	5.4 A gender perspective on the impact of biofuels
	5.5  What are the benefits of modern bioenergy for cooking, heating and local power generation?
	5.6  A range of tools for decision-making at various levels
		5.6.1 Typologies for projects, programmes or policies
		5.6.2 Certification schemes
		5.6.3 Towards internationally coordinated guidelines?
CONCLUSION
References
Acknowledgements
Appendices
	A1  Summary of commodity price effects of major biofuel policies
	A2  Land deals in Africa
	A3  Biofuels: gender impacts
Back Cover
                        
Document Text Contents
Page 1

A report by

The High Level Panel of Experts

on Food Security and Nutrition

June 2013

Biofuels and food security

5HLPE R E POR T

Page 2

mailto:[email protected]
mailto:[email protected]

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developing countries food systems. From the point of view of food security, however, the global sugar
market is less central than corn.

33


The structure of the global sugar market is singular. Brazil alone accounts for some 50 percent of this
market, which depends on few producer countries. India is also a major producer and tends to define
trends in world sugar prices, depending on the outcomes of its traditionally fluctuating harvests.

Roughly speaking, half of Brazilian sugar cane goes to ethanol and half to sugar, and sugar-cane
expansion generally implies a proportional increase in both sugar and ethanol production (Figure 11).
There is some disagreement in the literature on the degree of flexibility available to sugar mills to
switch from one product to the other resulting from shifts in relative prices. Nevertheless, the growth in
sugar devoted to ethanol corresponded to almost 60 percent of the increase in demand for raw sugar
(see Figure 11).

To assess if and how sugar-cane expansion could affect the supply, and therefore the prices, of sugar
and other foodstuffs, Elobeid et. al. (2012) ran two scenarios, using the FAPRI/CARD model, in which
global ethanol consumption was increased by 25 percent relative to a business-as-usual baseline
case. For the first scenario, the authors allowed Brazilian producers to extend cropped areas. In the
second scenario, the ability to expand area in Brazil was reduced significantly. For both cases, the
prices of sugar increased by about 4.3 percent. Such moderate impacts, and the lack of a larger
difference between the scenarios could indicate the capacity of producers in Brazil to intensify
production in existing cropland, increase the areas subject to double cropping, and release some
pasture to be used for crops.

Figure 11 Sugarcane production, ethanol and sugar production and prices in Brazil







Source: www.cepea.esalq.usp.br for ethanol price in Brazil; www.indexmundi.com for world sugar price; MAPA
(2013) for sugarcane, ethanol and sugar production; Meyer et al. (2012) for the production costs of ethanol, based

on Goldemberg (2007). The world sugar price is a very close proxy to the Brazilian sugar price available at
www.cepea.esalq.usp.br. Mt = Million tonnes, Mm

3
= Million cubic meters


33

Sugar has a variety of competitor products in the sweetener market. It also competes with corn fructose in soft drinks,
which creates therefore a link connecting corn and sugar prices.



Used for ethanol

Used for sugar
Production cost
of ethanol

Ethanol price

Sugar price

S
u

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a

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n

d
e

th
a

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o

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x

p
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e
(J

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4

=
1

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rc
a

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p

ro
d

u
c

ti
o

n
(

m
il
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s
)

223.4 Mt

11.73 Mm
3


9.26 Mt

316.1 Mt

12.49 Mm
3


22.38 Mt

166.1 Mt

5.82 Mm
3


8.86 Mt

588.4 Mt

23.21 Mm
3


38.24 Mt

Sugarcane

Ethanol

Sugar

http://www.cepea.esalq.usp.br/
http://www.indexmundi.com/
http://www.cepea.esalq.usp.br/

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67

The above analysis suggests that Brazilian sugar-cane expansion does not significantly affect the
supply, and therefore the prices, of other foodstuffs. Other ethanol-producing countries largely use
either sugar beet, or molasses. Molasses are a by-product of sugar production, and, therefore, their
use does not affect the sugar market, while, at the same time, increasing returns from production
(Goppal and Kammen, 2009).

Econometric studies (such as Serra, 2011) have shown prices of Brazilian ethanol to be correlated to
the prices of crude oil and sugar. While the diversion of large amounts of sugars to ethanol production
lead, everything else being equal, to an increase in the price of sugar relative to what it would have
been without ethanol, these studies suggest that, given the overall increase in sugar cane production,
the total effect has been mild and that, in the Brazilian market, world sugar and oil prices influence
ethanol prices more than the reverse (Serra, 2011).

Production costs of ethanol in Brazil have steadily declined since 1975 (Goldemberg, 2007 and Figure
11 and prices in the ethanol market seems today more driven by other market-related factors than net
ethanol production costs, such as the opportunity value as a gasoline substitute, and the opportunity
value of sugar (which has increased), Figure 11 shows.

3.3.4 Biodiesel and the EU

Biodiesel production is increasing rapidly in the US, is dominant in the EU, and has experienced
strong growth in a number of countries – particularly Brazil and Argentina using soybean and Malaysia
and Indonesia using palm oil. Nevertheless, world production of biodiesel is much smaller than ethanol
in terms of absolute volume (Figure 2). However, it is not smaller in terms of the amount of feedstock
utilized relative to the size of the market. OECD/FAO (2011) projected that 16 percent of total
vegetable oils produced in 2021 would be used for biodiesel production. In addition, as indicated in our
reference both to soybean and palm oil, biodiesel can use a wide variety of vegetable oils, animal fats
and even used cooking oil. Therefore demand for biodiesel can have impacts on several markets.

Differently from ethanol using either corn or sugar, vegetable oil feedstocks command higher prices,
which makes biodiesel far less competitive with conventional diesel fuel without the recourse to
incentives (see Chapter 2). The existence and growth of the biodiesel market, as a result, depend
heavily on support policies. Data from the EIA (2012) show that when support policies have been
removed in the US, biodiesel production has dropped proportionately.

The importance of support policies to make biodiesel economically competitive makes it difficult to find
a relationship, if any, between energy and biodiesel prices. In principle, however, the same dynamic
would apply as in corn ethanol with fuel, feed and food market players able to arbitrate and play off the
comparative value of these feedstocks. In the short term, as in the case of the US 2012 drought, food
demand may determine its price, but in the long term the price will tend to reflect the energy value of
feedstock.

A number of studies have examined the impact of biodiesel production on food prices, although
considerably fewer than in the case of corn ethanol. One model-based study that has analysed some
18 different animal fats and vegetable oils assuming biodiesel production increases to 2012, in line
with the RFS mandates, as against a baseline with no biodiesel production, concluded that prices
increases ranged from 8 to 38 percent (Thompson, Meyer and Green, 2010). The study highlighted
that any demand shock on one product could have a wave effect on the markets for other oils and
fats.

The US, Brazil, Argentina, Colombia, Malaysia, Indonesia and Thailand all have biodiesel programmes
but they all base their programmes on the domestic production of feedstock, either using soybean or
palm oil. In the EU, the dominant vegetable oil crop is rapeseed and when the biofuel targets were
initially cogitated this feedstock received great stimulus because of the predominant diesel model for
the car fleet. As other energy crops, it was exempt from the planting restrictions on set-aside lands
(see Chapter 2). With the definition of biofuel targets for EU member countries, rapeseed production
exploded but was unable to accompany the biofuel industry´s demand for feedstock (see Figure 12).

Three major questions were posed. To what extent were the EU targets influencing the global market
for vegetable oil feedstocks? To what extent were these developments affecting food market prices for
vegetable oils? And concerns were also raised in terms of indirect land-use change (ILUC) impacts
and consequences of EU biodiesel programmes, which we discuss in Chapter 4. Here we will focus on
the price transmission factors involved.

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Figure 14 HLPE project cycle






CFS Committee on World Food Security
HLPE High Level Panel of Experts on Food Security and Nutrition
StC HLPE Steering Committee
PT HLPE Project Team


Source: HLPE, 2012.

CFS defines HLPE mandate at plenary level

StC defines the project’s oversight modalities, and

proposes scope for the study

Draft scope of the study is submitted
to open electronic consultation

StC appoints a Project Team, and finalizes
its Terms of References

PT produces a version 0 of the report (V0)

V0 is publicly released to open electronic consultation

PT finalizes a version 1 of the report (V1)

HLPE submits V1 to external reviewers,
for academic and evidence-based review

PT prepares a pre-final version of the report (V2)

V2 is formally submitted to the StC for approval

Final approved version is transmitted to the CFS
and publicly released

The HLPE report is presented for
discussion and policy debate at CFS

CFS


CFS


CFS


StC

StC

StC


PT

PT


PT

Page 132

Secretariat HLPE c/o FAO
Viale delle Terme di Caracalla
00153 Rome, Italy

Website: www.fao.org/cfs/cfs-hlpe
E-mail: [email protected]

Cover photos: ©FAO/Giuseppe Bizzarri; ©FAO/Ami Vitale;
©FAO/Marco Salustro; ©FAO/Olivier Thuillier; Rufino Uribe

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