The role of biofuels in food commodity prices volatility and land use

Abstract

The goal of this study is to investigate the cause of a growing food price volatility. We analyse whether food price volatility is mainly induced by transfer of the oil price shock or if it is the consequence of a rising and competitive biofuel production. Furthermore, we evaluate the impact of biofuels on land use as well. Food prices have lately surged and declined sharply and become more volatile. High fuel prices combined with a rising biofuel production created a link between crude oil and food prices. We investigated the impact of a biofuel production on an increased volatility in oil and food prices, and found correlations between cereals, sugar and vegetable oil price index and crude oil prices from 2003 to 2016. Our results show that the main driver for food price fluctuation is mainly the oil price shock. The increasing biofuel output has been associated with a rising protein-rich animal feed production. The use of co-products as animal feed has land use implications including GHG emission savings because co-products reduce land and the demand for chemical inputs required in the feed production.