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We quantify the emergence of biofuel markets and its impact on U.S. andworld agriculture for the coming decade using the multi-market multi-commodityinternational FAPRI model. The model incorporates the tradeoffs between biofuel, feed,and food production and consumption and international feedback effects of theemergence through world commodity prices and trade. We examine land allocation bytype of crop, and pasture use for countries growing feedstock for ethanol (corn,sorghum, wheat, sugarcane, and other grains) and major crops competing with feedstockfor land resources such as oilseeds. We shock the model with exogenous changes inethanol demand, first in the United States, then in Brazil, China, EU, and India, andcompute shock multipliers for land allocation decisions for crops and countries ofinterest. The multipliers show at the margin how sensitive land allocation is to thegrowing demand for ethanol. Land moves away from major crops and pasturecompeting for resources with feedstock crops. Because of the high U.S. tariff on ethanol,higher U.S. demand for ethanol translates into a U.S. ethanol production expansion. Thelatter has global effects on land allocation as higher coarse grains prices transmitworldwide. Changes in U.S. coarse grain prices also affect U.S. wheat and oilseedsprices, which are all transmitted to world markets. In contrast, expansion in Brazilethanol use and production chiefly affects land used for sugarcane production in Braziland to a lesser extent in other sugar-producing countries, but with small impact on otherland uses in most countries.
