U.S. Biodiesel Production: Recent Developments and Prospects

Biodiesel has recently experienced a major surge worldwide. A rapid expansion in production capacity is being observed not only in developed countries such as Germany, Italy, France, and the United States but also in developing countries such as Brazil, Argentina, Indonesia, and Malaysia. Interest in and expansion of the production of the renewable fuel has been fostered by mandates and fi nancial incentives offered by governments

A Comparative Analysis of the Development of the United States and European Union Biodiesel Industries

Worldwide production of biodiesel is growing at a rapid pace. Arguably, the European Union (EU) is the global leader in biodiesel production, but the United States has recently expanded its production. The growth of the biodiesel industry in both regions has been fueled by a series of government-provided financial incentives. However, the timing of the growth and incentive provisions, the nature of the main incentives, and the market conditions differ across regions. This article provides a comparative analysis of the EU and U.S. biodiesel industries, highlighting market and policy aspects that are leading to a rapid but distinct growth

Index Insurance, Production Practices, and Probabilistic Climate Forecasts

The failure of the development of commercially viable traditional crop insurance products and innovations in financial markers has fed a renewed interest in the search for alternatives to help producers in developing countries manage their risk exposure. Salient among these is the proposal of several index insurance schemes against weather events. Among the basic tenets are that the presence of index insurance allows producers to intensify their operations and reduce the risks of default and hence may induce creditors to offer loans at affordable rates. The two factors combined are touted as key to help producers in developing countries escape poverty traps. Improvements in seasonal climate forecasts create challenges for the design and effective functioning of the insurance against climate risks. However, very little is known about potential synergies or conflicting impacts of these two institutions, and the interactions between them and input management decisions by producers. We find that insurance and forecast may have synergistic or conflicting effects on input decisions. In the presence of (state contingent) actuarially fair insurance, producers may prefer the forecast information not to be available, especially if the management options available do not result in sufficient changes in profitability. Perhaps surprisingly, we find that forecast information may induce producers to increase the amount of insurance purchased.Climate forecast, Index insurance, Input Decisions, Risk Management, Weather risks, Risk and Uncertainty,

Reputations, Market Structure, and the Choice of Quality Assurance Systems in the Food Industry

Many food traits desired by consumers are costly to provide and difficult to verify. A complicating factor is that delivered quality can only be affected stochastically by producers and imperfectly observed by consumers. Markets for these goods will emerge only if supplying firms can be trusted. We develop a repeated purchases model to explore how quality discoverability, market structure, nature of reputations, market premiums, and discount factors drive firm choice about the stringency of quality assurance systems designed to gain consumer trust. Reputation protection is key incentive for firms to invest in high-quality goods and quality assurance systems.

Reputations, Market Structure, and the Choice of Quality Assurance Systems in the Food Industry

A repeated-purchases model is developed to explore the fundamental economic factors that lie behind the choice of different quality assurance systems and their associated degrees of stringency by firms. Differences in the quality discoverability of a sought-after attribute, market structure, attractiveness of a market, nature of reputations, and the value placed in the future are among the factors contributing to the implementation of widely diverse systems across participants in different markets. Close attention is paid to the role of reputations in providing the incentives for firms to deliver high-quality goods. We model three different scenarios - monopoly, duopoly with firm-specific reputations, and duopoly with industry-wide reputations - and compare the resulting welfare of processors and their customers. We also provide a rationale for the branding efforts of many firms to distinguish their products along the supply chain.quality assurance, reputations, repeated purchases, product quality, supply chain, value-added agriculture, imperfect information, Marketing,

Supply chain management of differentiated agricultural products under imperfect information

Participants in a supply chain of agricultural value added products face two significant challenges. First, many of the costly distinctive traits being desired by consumers are difficult (if not impossible) to observe even after consumption. In order for markets for these classes of goods to develop, firms touting the quality of the product need to be trusted. Hence, maintaining an excellent reputation is essential for firms to keep their customers\u27 good will. Secondly, production is conducted in an environment of yield uncertainty, making it impossible for producers and processors to predict with certainty either the quantity or the quality of the input that will be available in any given season. In short, production, processing, and marketing of some value added products require tighter coordination mechanisms than those afforded by open market transactions.;Chapter 2 studies the merit and feasibility of co-existence of spot and contract markets for a value added product. Co-existence of contract and spot markets arise as an equilibrium for a wide range of distinct parameterizations of the model. The fundamental economic factors influencing the prevalence of each market are identified. In order to obtain co-existence, both yield uncertainty and a vigorous competition whenever a spot market arises are needed. Chapter 3 analyzes the optimal choice of a quality assurance system (QAS) a processing firm should require from its suppliers in the presence of imperfect information. We find that firms will require more stringent QAS when quality is easier to discover, and reputations are firm specific (as opposed to industry-wide). Also, monopolists will implement more stringent QAS than duopolists, indicating that market concentration is not necessarily welfare reducing in this environment. Policy implications are drawn. Chapter 4 proposes a flexible framework that can be used empirically by a group of producers to sort their product into quality classes based on the results of potentially imperfect tests. The models are designed to obtain thresholds for certification, and provide insights on why finding the optimal thresholds to certify tenderness has been so elusive. An illustration of how to put the framework to work is provided

Second-generation biofuels : economics and policies

Recent increases in production of crop-based (or first-generation) biofuels have engendered increasing concerns over potential conflicts with food supplies and land protection, as well as disputes over greenhouse gas reductions. This has heightened a sense of urgency around the development of biofuels produced from non-food biomass (second-generation biofuels). This study reviews the economic potential and environmental implications of production of second-generation biofuels from a variety of various feedstocks. Although second-generation biofuels could significantly contribute to the future energy supply mix, cost is a major barrier to increasing commercial production in the near to medium term. Depending on various factors, the cost of second-generation (cellulosic) ethanol can be two to three times as high as the current price of gasoline on an energy equivalent basis. The cost of biodiesel produced from microalgae, a prospective feedstock, is many times higher than the current price of diesel. Policy instruments for increasing biofuels use, such as fiscal incentives, should be based on the relative merits of different types of biofuels.Energy Production and Transportation,Renewable Energy,Climate Change Mitigation and Green House Gases,Crops&Crop Management Systems,Transport Economics Policy&Planning

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,

Reputations, Market Structure, and the Choice of Quality Assurance Systems in the Food Industry

Participants in a supply chain of agricultural value-added products face significant challenges. Many of the costly distinctive traits are difficult (if not impossible) to observe even after consumption. A complicating factor, addressed here, is that in some circumstances delivered quality can only be imperfectly learned and/or affected stochastically by producers. In order for markets for these goods to arise, firms touting the quality of the product need to be trusted. In response to these challenges, new (and diverse) quality assurance systems (QASs) that facilitate the acquisition and flow of information about agricultural and food products are being put in place. A repeated-purchases model is developed to explore the fundamental economic factors that lie behind the choice of different QASs and their associated degrees of stringency by firms. Differences in the quality discoverability of a sought-after attribute, market structure, attractiveness of a market, nature of reputations, and the value placed in the future are among the factors contributing to the implementation of widely diverse systems across participants in different markets. Close attention is paid to the role of reputations in providing the incentives for firms to deliver high-quality goods. We model three different scenarios—monopoly, duopoly with firm-specific reputations, and duopoly with industry-wide reputations—and compare the resulting welfare of processors and their customers. We also provide a rationale for the branding efforts of many firms to distinguish their products along the supply chain