Bringing Agriculture into the GATT: Negotiating a Framework for Action

International Relations/Trade,

BY-PRODUCT UTILIZATION FROM BIOMASS CONVERSION TO ETHANOL

Oil shortages during the 1970\u27s focused attention on the role of the agricultural sector as a supplier of energy through the production of alcohol fuel from grains and/or agricultural biomass. Current technology, cost and supply considerations indicate that corn grain will be the initial agricultural product used in the commercial production of alcohol. A major goal of this research was to indicate potential magnitudes of impacts on agricultural markets due to an alcohol program. The adjustments in the domestic feed and livestock sector were of primary interest. Nutritionally balanced feed rations containing by-product feeds from alcohol production were formulated. These rations were introduced into a quadratic programming model of the agricultural sector and the extent of the market for these feeds was examined. The analyses indicated that the size of the potential market for by-product feeds depends on their relative prices. The market for these feeds under current pricing relationships is limited. An alcohol program of 8.4 billion gallons a year will necessitate either exportation of by-product feeds or a pricing system that reflects the energy values, rather than the higher protein values, of these by-products. Long-run adjustments in national agricultural markets to an independently specified level of alcohol production also examined using two programming models. The models differed in their level of aggregation of the production sector. Our results indicate that estimates of responses in agricultural markets to an alcohol program depend on the level of alcohol production, the type of alcohol processing technology and the specification of the empirical model. In general these analyses suggested that prices of corn and soybeans may rise by 6 to 9 percent, while wheat prices may increase by 13 percent. Prices of livestock outputs remained relatively stable. The adjusted cost of alcohol produced from corn was significantly higher than the current, net of tax pump price of gasoline