Biofuels and Rural Economic Development in Latin America and the Caribbean
questions will be extremely relevant to LAC countries policy formulation and implementation environments especially with regard to bioenergy. Figure 5.6 Cereal and Crude Oil Price Index 1905-2000 (For all series 1960=100) 300
250
200
150
100
50
0 1900
1910 1920
1930
1940
1950 1960
Crude oil prices
Wheat
1970
1980
Maize
1990 2000
2010
Rice
Source: Author‘s construction based on a presentation by Von Braun (2008).
5.15 The surge in agricultural commodity prices can be traced back to changes in many of the supply, demand and trade considerations and new factor that changed agricultural markets in developed and developing countries. From the supply (production) side, agriculture is now facing increased pressures on land, water, inputs and changes in workforce patterns, especially towards urban and international migrations. Increased pressures induced by abrupt and unpredictable climate change patterns will likely become even more serious in the near future. Furthermore, LAC countries will face the impact of policy decisions by other developed and developing countries as they address the issue of climate change. The LAC policy milieu becomes even more complex once these countries‘ agrarian structure, technology and policy gaps and limitations are taken into consideration. 5.16 From the demand side, income growth in countries such China, India, Brazil and Russia, implied a change in food consumption patterns, including a shift towards a higher demand for animal products. The change in consumption patterns has been reinforced by demand changes originating from energy security policies that promoted Bioenergy and Biofuels production in several countries. Not surprisingly, a well known result from economic theory and experience is that as a demand increase (a rightward shift to the demand curve) for feedstocks used to produce a particular product (biofuels) increases, price of the input (feedstock) increases ceteris paribus. Even if production increases (a rightward shift of the supply curve), if the relative shift of the demand curve dominates, prices and quantity will still increase.
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