The Impacts of Energy Prices on Global Agricultural Commodity Supply

Abstract

This study assesses the role of energy prices in determining cross-commodity and cross- country projections of production costs, area harvested and production of four major commodities and ethanol and biofuels production. The analysis is conducted using a dynamic global partial equilibrium model of agricultural trade. By simulating changes in energy prices that might result as a consequence of changes in energy policy, we capture the link between the energy market and the agriculture-biofuels sector and present resulting changes in production in major production regions for corn, soybeans, wheat, and rice. Input costs will increase with higher energy prices, but decline slightly with lower energy prices. The projection indicates that higher energy prices will have significant impact on increasing ethanol production in Brazil while decreasing wheat production in the EU. Production in the US and India is relatively unaffected by change in energy prices.