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Biofuel and Food-Commodity Prices

Author(s): Gal Hochman | Scott Kaplan | Deepak Rajagopal | David Zilberman

Journal: Agriculture (Basel)
ISSN 2077-0472

Volume: 2;
Issue: 3;
Start page: 272;
Date: 2012;
Original page

Keywords: biofuels | commodity-food prices | economic growth | energy prices | exchange rate

The paper summarizes key findings of alternative lines of research on the relationship between food and fuel markets, and identifies gaps between two bodies of literature: one that investigates the relationship between food and fuel prices, and another that investigates the impact of the introduction of biofuels on commodity-food prices. The former body of literature suggests that biofuel prices do not affect food-commodity prices, but the latter suggests it does. We try to explain this gap, and then show that although biofuel was an important contributor to the recent food-price inflation of 2001–2008, its effect on food-commodity prices declined after the recession of 2008/09. We also show that the introduction of cross-price elasticity is important when explaining soybean price, but less so when explaining corn prices.
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