Ravello June 2012 Meyer, Binfield and Thompson Seth Meyer Economist Global Perspective Studies Group FAO, Rome The Role of Biofuel Policy and Biotechnology in the Continued Development of the Ethanol Industry in the United States Wyatt Thompson Julian Binfield Food and Agricultural Policy Research Institute University of Missouri, USA
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Seth Meyer Economist Global Perspective Studies Group FAO, Rome
The Role of Biofuel Policy and Biotechnology in the Continued Development of the Ethanol Industry in the United States. Seth Meyer Economist Global Perspective Studies Group FAO, Rome. Wyatt Thompson Julian Binfield Food and Agricultural Policy Research Institute - PowerPoint PPT Presentation
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The Role of Biofuel Policy and Biotechnology in the Continued
Development of the Ethanol Industry in the United States
Wyatt ThompsonJulian Binfield
Food and Agricultural Policy Research InstituteUniversity of Missouri, USA
Ravello June 2012Meyer, Binfield and Thompson
Agenda• Model Overview• Biofuel policy and effects of US mandate
removal on biofuel and agricultural markets
• Simulation of technology adoption in the context of US biofuel policy, who benefits and why?
In the long run maize prices can’t be too cheap (relative to oil) too long but in the medium run (10 years) there can be substantial divergence.
Ravello June 2012Meyer, Binfield and Thompson
A Model of US Agriculture and Biofuel markets and policy
• Deterministic projections: single solution for endogenous variables based on a single set of assumptions. Smooth yield paths over 10 years.• Stochastic projections: (500 solutions based on 500 sets of assumptions in this case) introduces variability• Biofuel and agricultural policies are often non-linear and thus context plays a critical role in the results.• Explore both levels and variability.
Ravello June 2012Meyer, Binfield and Thompson
Stochastic model, part 1
• US partial equilibrium model– Rest of world represented with reduced form equations– Covers crop, livestock, biofuel (and energy) markets
• Dynamic– Solves for 10 consecutive years (2012/13 to 2021/22)– Has some path dependency– Includes some investment behavior (e.g., livestock, biofuel capacity)
• Hybrid
– Some parameters estimated econometrically– Others based on judgment, but calibrated to market data and often
reviewed
Ravello June 2012Meyer, Binfield and Thompson
Stochastic model, part 2• Exogenous variables drawn from grouped
joint distributions– Crop yield error terms (equations include trend &
prices)– Energy prices and input costs (PE model)– Domestic demand equation error terms – Stock demand equation error terms– Trade error terms (world uncertainty)
• 500 sets of 10 year solutions in this case
Ravello June 2012Meyer, Binfield and Thompson
Yield effect on prices and returns(2021/22 crop year)
8 9 10 11 12 13 140
50
100
150
200
250
300
350
maize yield - metric tons per hecteare
Do
llars
pe
r m
etr
ic t
on
8 9 10 11 12 13 140
500
1000
1500
2000
2500
maize yield - metric tons per hecteare
Do
llars
pe
r h
ec
tare
maize farm price maize mkt. net-ret
Ravello June 2012Meyer, Binfield and Thompson
Mandate Policy
SM
DM
QM
PM
*Simplification which excludes, among other things, wholesale to retail markup