Government biofuel policies affect fuel and farm commodity prices, but the price of a barrel of oil can have even larger effects.
That is the conclusion of a report by the University of Missouri Food and Agricultural Policy Research Institute (FAPRI). The study researched biofuel scenarios based on 500 random draws of possible weather, production and other market influences. The most extreme scenario allows current tax credits and tariffs to expire as scheduled and would not enforce the energy bill mandates. In this scenario, without most current biofuel policies, corn prices would decline 14 percent on average compared to a scenario that continues current support measures.
“The impact of biofuel policies depends not just on the policy but very much on the market context,” said Pat Westhoff, FAPRI co-director.
“Mandates have little market impact when high petroleum prices contribute to high biofuel prices and production levels.” Westhoff said. “On the other hand, mandates can be important when petroleum prices are low or crop supplies are reduced.”
The report, “Biofuels: Impact of Selected Farm Bill Provisions and other Biofuel Policy Options,” was published online June 12.