Removing Distortions in the U.S. Ethanol Market: What Does It Imply for the United States and Brazil?

We analyze the impact of trade liberalization and removal of the federal tax credit in the United States on U.S. and Brazilian ethanol markets using a multi-market international ethanol model calibrated on 2005 market data and policies. The removal of trade distortions induces a 23.9 percent increase in the price of world ethanol on average between 2006 and 2015 relative to the baseline. The U.S. domestic ethanol price decreases by 13.6 percent, which results in a 7.2 percent decline in production and a 3.8 percent increase in consumption. The lower domestic price leads to a 3.7 percent rise in the share of fuel ethanol in gasoline consumption. U.S. net ethanol imports increase by 199 percent. Brazil responds to the higher world ethanol price by increasing its production by 9.1 percent on average. Total ethanol consumption in Brazil decreases by 3.3 percent and net exports increase by 64 percent relative to the baseline. The higher ethanol price leads to a 4.9 percent increase in the share of sugarcane used in ethanol production. The removal of trade distortions and 51¢ per gallon tax credit to refiners blending ethanol induces a 16.5 percent increase in the world ethanol price.biofuels, ethanol, renewable fuels, trade liberalization, Resource /Energy Economics and Policy, F13, F17, Q17, Q18, Q42,

Multilateral Trade and Agricultural Policy Reforms in Sugar Markets

We analyze the removal of current market interventions in world sugar markets using a partial-equilibrium international sugar model calibrated on 2002 market data and current policies. We analyze the impact of trade liberalization and the removal of production subsidies and consumption distortions. The removal of trade distortions alone induces a 27 percent price increase by the end of the decade relative to the baseline level for sugar. The removal of all trade and production distortions induces a 48 percent price increase by the end of the outlook period. Aggregate trade expands moderately, but location of production and trade patterns are substantially affected. Protectionist countries of the Organisation for Economic Cooperation and Development (OECD) (the European Union, Japan, and, to a lesser extent, Mexico and the United States) experience an import expansion or export reduction and significant contraction in production in unfettered markets. World beet production decreases by 21 percent by the end of the decade, whereas world cane production increases by 8 percent. Brazil, Australia, Cuba, Indonesia, and Turkey expand production when all distortions are removed. Aggregate world sugar production and use decrease by 2 percent. We discuss the significance of these results in the context of the mounting pressures to reform U.S. and E.U. sugar policies and increase market access in OECD countries.Agricultural and Food Policy, International Relations/Trade,

Mitigating Land Use Changes From Biofuel Expansion: An Assessment of Biofuel Feedstock Yield Potential in APEC Economies

The emerging biofuel sector has drawn great interest as an alternative source of fuel for transportation. The expansion of biofuels greatly impacts world agricultural markets, since currently, the primary feedstocks for ethanol and biodiesel production are field crops and their derived products. There is great interest in the potential of countries to expand their biofuel sectors through increased production of feedstocks. The long-term potential for developing first-generation biofuels in many countries depends on a large and constant supply of feedstocks. This may be achieved in two ways: land extensification and/or land intensification. However, expansion of land area comes with a number of environmental challenges highlighted by the recent debate on indirect land use change brought about by biofuel expansion (Searchinger et al., 2008; Fargione et al., 2008). Therefore, land intensification through yield growth, and production of second-generation biofuel feedstocks, such as crop residues and perennial grass on marginal land, are generally seen as critical factors for sustainable development of biofuels as well as mitigation of land use changes. In this context, it is essential to gain a better understanding of the yield trends and the future yield potential of biofuel feedstocks to help determine the impact of biofuel expansion on agricultural markets. Therefore, the aim of this analysis is to review and analyze historical and projected trends of crop yields, particularly for crops used in biofuel production. One of our major interests is the impact of crop prices on yields in the long run, given that the increased production of biofuels from crops has created a perceived permanent increase in crop prices. Based on this analysis, we draw conclusions regarding the yield potential of biofuel feedstocks. We focus our analysis on APEC economies because of their rapidly growing interest in biofuel development and the diversified agricultural production among member countries. Comparing average annual growth in crop yields across APEC economies and across crops, we find that the crop yield growth rates vary significantly. Corn ranks among the crops with the largest yield improvement in a significant number of the APEC economies, mostly due to increased fertilizer use and biotechnology. The analysis also reveals that sugarcane yields have been fairly stable with the exception of significant growth in China, Philippines and Thailand. One of the highest soybean yields is seen in the United States, which is a major producer. Soybean yields in China and Indonesia are lower relative to the United States, but show much lower variability over time. In the past decade, palm oil yields have increased dramatically in Indonesia. Further analysis reveals that an economy, like the United States, which already has high yield levels for the majority of crops, experiences relatively lower yield growth rates relative to other economies. On the other hand, economies like Philippines and Malaysia have relatively lower corn yields but high yield growth rates, which indicate a higher potential for increasing crop production through yield increases rather than land expansion. Yield growth rates for most crops in most APEC economies fall in the lower to medium range although there is significant variance in yields among the economies. This variation could be due to the fact that some economies have adopted mechanization and new technologies in their crop production, whereas other economies rely heavily on labor and basic inputs. Hence, economies with high technical advantage have the potential to improve crop yields by continuous development in biotechnology. In contrast, economies with less technological resources may enhance crop yields through increasing input utilization including more capital intensive inputs. We also compute yield elasticities with respect to a time trend variable for the major crops in APEC economies. For most but not all APEC economies, the coefficient estimates are statistically significant. There is wide variation in the magnitude of the elasticities among economies and crops, some even with a negative elasticity. When comparing among crops, we see that corn yields show relatively higher elasticities with respect to time trend. Across APEC economies, China shows consistent yield response over time for all crops. Across crops, sorghum has the highest elasticity in China, corn in the Philippines, sugar beet in Canada, wheat in New Zealand, rice in Indonesia, and sugarcane in Malaysia. In addition to the increased production in primary crops, yield growth would also translate to an increase in available crop residues. According to Milbrandt and Overend (2008), ethanol from currently available crop residues could potentially displace about 33% of gasoline consumption in the APEC region, assuming that cost-competitive technologies for production of ethanol from second-generation lignocellulosic feedstocks can be deployed. Thus, given average yield growth projections for certain crops in APEC economies, our calculations show that the United States could potentially displace an additional 2% of gasoline from corn residue, Australia an additional 9% of gasoline from wheat residue, and Thailand an additional 3.5% from sugarcane residue, without increasing land for biofuel production. The analysis concludes that in terms of first-generation biofuels, yield growth is imperative for the long-term potential of biofuel expansion if land extensification is to be minimized. Biofuel expansion may imply increased land use for feedstock production in the medium term, but growth in feedstock yields will tend to mitigate the impact on crop prices and land use over the longer term. Additionally, long-term expansion of biofuels may have to rely on the economic viability of production from lignocellulosic feedstocks. Based on the data analysis, APEC economies have the capability and the capacity to increase feedstock yields for biofuel production, particularly the economies that have relatively lower yield levels and are further away from their yield plateau levels. However, this requires targeting yield-enhancing activities including investments in agricultural R&D, better farm practices, and increased input use. Some of the practices that already have resulted in yield improvements in some countries, such as extension services and fertilizer subsidies, could be transferred to other economies. Countries could also provide incentives, such as tax reductions or government payments, which have proven to be successful in inducing farmers to invest in yield-improving technologies. However, it is crucial that each economy should identify its own advantage in terms of productivity improvements for its agricultural commodities. To achieve yield growth, countries should create an environment conducive to technological change and diffusion of new technology through public R&D and incentives for private R&D investments. References: Fargione, J., J. Hill, D. Tilman, S. Polasky, and P. Hawthorne. 2008. “Land Clearing and the Biofuel Carbon Debt”, Science, February 29: 1235-1238. Milbrandt, A. and R.P. Overend. 2008. “Survey of Biomass Resource Assessments and Assessment Capabilities in APEC Economies.” Energy Working Group, Asia-Pacific Economic Cooperation, APEC# 208-RE-01.9. Searchinger, T., R. Heimlich, R. Houghton, F. Dong, A. Elobeid, J. F. Fabiosa, S. Tokgoz, D. J. Hayes, T. Yu. 2008. “Factoring Greenhouse Gas Emissions from Land Use Change into Biofuel Calculations”, Science, February 29:1238-1240.biofuels, yield growth, APEC, Land Economics/Use, Productivity Analysis,

The Impact of Trade Barriers on Mandated Biofuel Consumption in Canada

biofuel ethanol trade Canada, Agricultural and Food Policy, Demand and Price Analysis, International Relations/Trade,

Telemedicine: Blood Pressure Monitoring System for Individual Use through Internet

Hypertension and Hypotension are common diseases in Malaysians and the world at large. If not treated, they predispose the patient to more serious conditions like coronary heart disease and stroke. Regular blood pressure monitoring at home can be helpful in the management of the diseases. Doctors can use the data to evaluate the patient's condition and institute treatment. In this project, an Internet-based Blood Pressure Monitoring System (IBPMS) was developed, as a new application in telemedicine, for monitoring the patient's blood pressure at home. The data is automatically sent to the hospital database via the Internet. This system consisted of both hardware and software. A serial interface card connected to a blood pressure device was designed and tested. The software, which included a graphical display of blood pressure and homepage, was developed. The IBPMS system was designed and tested. The software, Visual Designer, was used to create the system, graphical display and control the operation of the interface card, while Hyper Text Mark-up Language (HTML) was used to develop the homepage. The complete IBPMS has been designed and experimentally tested with four subjects of ages from 25 to 30 years old. The measurement has been taken under the required room temperature and proper setting. Then these results have been compared with the real readings by using Omron blood pressure monitoring device. The difference is found to be within the range of the standard error. Thus, it can be stated that the developed IBPMS system is a convenient tool to patients for regular blood pressure monitoring at home and an important and useful application to the telemedicine service

Changing the U.S. Sugar Program into a Standard Crop Program: Consequences Under NAFTA and Doha

We analyze the impact of continuing the existing US sugar program, replacing it with a standard program, and implementing the standard program with multilateral trade liberalization. Under NAFTA, duty-free sugar imports from Mexico could undermine the program's ability to operate on a "no-cost" basis to US taxpayers as large public stocks of sugar could accumulate. The replacement of the current sugar program by one similar to other major US crop programs would solve the problem of potential stock accumulation, accommodate further trade liberalization under a new WTO and future bilateral trade agreements, but would induce significant fiscal outlays. Our analysis of recent WTO proposals suggests that a WTO agreement is unlikely to impose significant adjustment pressures on the US sugar market beyond those created by NAFTA. The adoption of a standard program would make it easier for the US to meet its commitments under a new WTO agreement in terms of reductions in trade-distorting amber-box support. Moving to a standard program would increase the costs of the program for taxpayers but would lower costs for sugar users. Given reasonable assumptions about program parameters, the principal program cost would likely be through direct payments rather than through countercyclical or loan-deficiency payments.

Ethanol Expansion in the Food versus Fuel Debate: How Will Developing Countries Fare?

his paper examines the impact of ethanol expansion in the United States, brought about by higher crude oil prices, on agricultural commodity prices. Given the United States\u27s stature as a major producer and exporter of many agricultural commodities, the resulting increase in commodity prices has spillover effects into the global market. Using the price changes estimated within a multi-commodity, multi-country agricultural modeling system, this paper attempts to show how an increase in world commodity prices would affect the costs of food baskets around the world and how higher food costs will impact food security, particularly in developing countries. In general, we find that countries where corn is the major food grain experience larger increases in food basket cost while countries where rice is the major food grain have smaller food basket cost increases. Countries where wheat and/or sorghum are the major food grains fall in between. Consequently, the highest percentage increases are seen in Sub-Saharan Africa and Latin America where food basket costs are estimated to increase by at least 10%. The lowest percentage increases are seen in Southeast Asia, with cost increases of less than 2.5%

Global Biofuel Expansion and the Demand for Brazilian Land: Intensification versus Expansion

We use a spatially disaggregated model of Brazilian agriculture to assess the implications of global biofuel expansion on Brazilian land usage at the regional level. This Brazilian model is part of the FAPRI agricultural modeling system, a multimarket, multi-commodity international agricultural model, used to quantify the emergence of biofuels and to analyze the impact of biofuel expansion and policies on both Brazilian and world agriculture. We evaluate two scenarios in which we introduce a 25% exogenous increase in the global demand for ethanol and one scenario in which we increase global ethanol demand by 50%. We then analyze the impact of these increases in terms of land-use change and commodity price changes particularly in Brazil. In the first scenario, we assume that the enforcement of the land-use reserve in Brazil remains at historically observed levels, and that abundant additional land can be readily incorporated into production. The second scenario involves implementing the same exogenous biofuel demand shock but with a different responsiveness in area expansion to price signals in Brazil, reflecting varying plausible assumptions on land availability for agricultural expansion. The third scenario, which is similar to the first scenario but with a larger increase in global ethanol demand, is run to check whether increasing volume of ethanol requires the incorporation of additional quantities of land per unit of ethanol. We find that, within Brazil, the expansion occurs mostly in the Southeast region. Additionally, total sugarcane area expansion in Brazil is higher than the increase in overall area used for agriculture. This implies that part of the sugarcane expansion displaced other crops and pasture that is not replaced, which suggests some intensification in land use. The lower land expansion elasticities in the second scenario result in a smaller expansion of area used for agricultural activities. A higher proportion of the expansion in sugarcane area occurs at the expense of pasture area, which implied land intensification of beef production. This explains the small change in commodity prices observed between the first and second scenarios. These results suggest that reducing the overall responsiveness of Brazilian agriculture may limit the land-use changes brought about by biofuel expansion, which would in turn reduce its environmental impacts in terms of land expansion. Additionally, the impacts on food prices are limited because of the ability of local producers to increase the intensity of land use in both crop (by double cropping and raising yields) and livestock production (by increasing the number of heads of cattle per hectare of pasture or stocking rate) releases area that can be used for crops. In scenario three, we find that larger ethanol volumes did not require more land per unit of ethanol. Doubling the demand for ethanol does not change the results, which indicates that the limit for intensification is beyond the 50% expansion assumed in Scenario 3. In this range, the same amount of land is incorporated into production per additional unit of ethanol.Biofuels, Brazil, land use, Land Economics/Use,