Sugarcane ethanol: Contributions to climate change - BAFF
Sugarcane ethanol: Contributions to climate change - BAFF
Sugarcane ethanol: Contributions to climate change - BAFF
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5. The future<br />
Wheat<br />
Maize<br />
2007-08 2008-09<br />
Why are current food prices so high?<br />
Oilseeds<br />
Veg.oil<br />
Figure 13. Impact of export restriction policies on world prices. Source: Agriculture and Agri-Food<br />
Canada, unpublished.<br />
A�er the discussion of those driving elements which contributed <strong>to</strong> the current spike in<br />
food prices this section depicts some elements which might contribute <strong>to</strong> the long-term<br />
development of agri-food prices. �is sections also allows <strong>to</strong> identify possible solutions for<br />
the current crisis on world food markets.<br />
• High prices are their own worst enemy. Increased pro�t margins entice entrepreneurial<br />
investment, which results in increased production. Lower market prices inevitably<br />
follow. �e ‘invisible hand’ of Adam Smith ensures that winners’ gains and losers’ losses<br />
will be temporary, as entrepreneurs correct market imbalances. In the USA, in the 2008<br />
spring planting farmers are shi�ing from maize <strong>to</strong> wheat and soybeans, setting the prices<br />
of the latter on a downward trajec<strong>to</strong>ry and stabilising the price of the former.<br />
• Higher prices induce more production as planted areas increase and available arable land<br />
will be used more intensively. �erefore, the current situation is not structural and as<br />
a result prices will go down again. However, �rst s<strong>to</strong>cks have <strong>to</strong> be built up again. Both<br />
e�ects take some time. In Brazil and Russia there are ample opportunities as additional<br />
land can be taken in<strong>to</strong> production, whereas in many other countries production can<br />
only be higher due <strong>to</strong> intensi�cation. According <strong>to</strong> USDA analyses, Russia, Ukraine and<br />
Argentina can become one of the world’s <strong>to</strong>p grain exporters.<br />
• R&D investments in agriculture (e.g. yields, etc.) become more pro�table with higher<br />
food prices.<br />
• Strategic s<strong>to</strong>cks are essential <strong>to</strong> limit price volatility in world agricultural markets, but<br />
they are costly.<br />
• �e expected impact on world prices of the 10% EU-biofuel directive and the various<br />
global biofuel initiatives is depicted in the graph below (Banse et al., 2008a,b). If all<br />
initiatives are implemented <strong>to</strong>gether and technological <strong>change</strong> stays on the his<strong>to</strong>ric trend,<br />
<strong>Sugarcane</strong> <strong>ethanol</strong> 241<br />
Rice