Biofuels, food security and compensatory subsidies

Nov 2008

CEPEA/ESALQ/USP (the Center for Advanced Studies on Applied Economics, Brazil) has recently evaluated the economic and financial viability of both ethanol and biodiesel production in Brazil using both Value Chain Analyses and Linear Programming Optimizations for a set of six supply chains: beef cattle, soybeans, corn, cotton, peanuts and sunflower.
A supply chain includes purchase of farm inputs, farming activities, storing, crushing/processing and sale at wholesale level. The Southeast Brazil was chosen to carry the analyses because that is the current battleground region among food, ethanol and biodiesel. They also determined the opportunity cost of producing each of these alternative goods, the possible necessary subsidies if consumption is mandatory, as well the rates of return for the agribusiness (set of interrelated food, fiber and energy supply chains) sector under the scenario elaborated by FAPRI16, according to which relative price variations between 2008 and 2018 would be. Some results of this study, along with a number of other considerations about the food vs. fuel debate, are presented in this short paper.

By: G. Barros, L. Alves, M. Osaki (CEPEA)

 
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