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The Impacts of Expanded Biodiesel Production on the World Soybean Market Rafael Costa, Dwi Susanto & Parr Rosson Center for North American Studies (CNAS)

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Presentation on theme: "The Impacts of Expanded Biodiesel Production on the World Soybean Market Rafael Costa, Dwi Susanto & Parr Rosson Center for North American Studies (CNAS)"— Presentation transcript:

1 The Impacts of Expanded Biodiesel Production on the World Soybean Market Rafael Costa, Dwi Susanto & Parr Rosson Center for North American Studies (CNAS) Dept. of Agricultural Economics Texas A&M University

2 Objective Quantify the Impacts of Increased Biodiesel Production in the U.S. and Brazil on the International Soybean Market

3 Overview Biodiesel and Soybeans in the World Trade - Biodiesel Production and Expansion - World Soybean Production and Exports Methodology Scenarios and Results Conclusions

4 World Biodiesel Market EU is the largest biodiesel producer (1,711 million gallons in 2008), however… - Major feedstock for EU production is canola oil, not soybean oil U.S. is largest soybean-based biodiesel producer in the world followed by Brazil - In 2008, U.S. production = 393 million gallons. Brazil production = 290 millions gallons

5 Biodiesel Domestic Policies U.S. - Renewable Fuels Standard (RFS) has been a boost to biofuels production - FAPRI Forecast for 2018, U.S. production = 1,184 million gallons Brazil - Government program National Biodiesel Production Program (PNPB) establishes legal mandate for the use of biodiesel as a fuel - FAPRI Forecast for 2018, Brazil production = 875 million gallons

6 World Soybean Industry Source: PS&D, FAS/USDA World Soybean Production (1990/91- 2008/09) 1990/911994/951998/992002/032008/09 0% 20% 40% 60% 80% 100% ROW Argentina Brazil U.S. World Soybean Exports (1990/91-2008/09) 1990/911994/951998/992002/032008/09 0% 20% 40% 60% 80% 100% ROW Argentina Brazil U.S.

7 Methodology – International Spatial Equilibrium Model Quadratic programming model developed by Costa (2007). Spatial and temporal dimensions (quarters). 18 excess supply and 8 excess demand regions in Brazil. 5 exporting (excess supply) regions: US, Argentina, Rest of South America (RSA), Canada, and India. 5 importing countries (excess demand) regions: China, EU, Southeast Asia, Mexico, and the rest of the world (ROW).

8 Simulation Analysis 3 Scenarios - Scenario 1: 10% Increase in Biodiesel Production in the U.S. and Brazil  Total soybean crushed in the U.S. and Brazil goes up by 4,732 and 2,828 TMT, respectively  Conversion rate one bushel = 1.49 gallons of biodiesel, total biodiesel production in the U.S. and Brazil increases by 259 and 154 million gallons, respectively - Scenario 2: 20% Increase in Biodiesel Production in the U.S. and Brazil  Total soybean crushed in the U.S. and Brazil goes up by 9,464 and 5,657 TMT, respectively  Similarly, total biodiesel production in the U.S. and Brazil increases by 518 and 309 million gallons, respectively - Scenario 3: 30% Increase in Biodiesel Production in the U.S. and Brazil  Total soybean crushed in the U.S. and Brazil goes up by 14,196 and 8,485 TMT, respectively  Similarly, total biodiesel production in the U.S. and Brazil increases by 777 and 464 million gallons, respectively

9 Scenario 1: Impact on Prices ($/MT) Exporting CountryBase modelScenario 1Deviation (%) United States234.06269.7315.24 Brazil*200.62236.4617.86 Argentina234.14269.8115.23 Rest of South America234.14269.8115.23 Canada244.18279.8514.61 India246.27281.9414.48 Importing Country China278.94314.6112.79 European Union271.05306.7213.16 Southeast Asia278.94314.6112.79 Rest of the World267.77303.4413.32 *Farm Price

10 Scenario 1: Impact on Exports and Imports (thousand MT) Exporting CountryBase modelScenario 1Deviation (%) United States25127.3923149.98-7.87 Brazil26123.1924599.88-5.83 Argentina7325.897710.235.25 Rest of South America3229.463351.753.79 Canada1323.41377.114.06 India022.14- Total63129.3360211.09-4.62 Importing Country China28319.0527180.22-4.02 European Union13810.6513308.79-3.63 Southeast Asia11146.2310461.96-6.14 Mexico3535.143322.52-6.01 Total63129.3360211.09-4.62

11 Scenario 2: Impact on Prices ($/MT) *Farm Price Exporting CountryBase modelScenario 2Deviation (%) United States234.06300.928.56 Brazil*200.63267.2133.19 Argentina234.14300.9828.55 Rest of South America234.14300.9828.55 Canada244.18311.0227.37 India246.27313.1127.14 Importing Country China278.94345.7823.96 European Union271.05337.8924.66 Southeast Asia278.94345.7823.96 Rest of the World267.77334.6124.96

12 Scenario 2: Impact on Exports and Imports (thousand MT) Exporting CountryBase modelScenario 2Deviation (%) United States25127.3921573.65-14.14 Brazil26123.1923115.89-11.51 Argentina7325.898046.159.83 Rest of South America3229.463458.637.1 Canada1323.41424.057.61 India041.7- Total63129.3357660.07-8.66 Importing Country China28319.0526184.87-7.54 European Union13810.6512870.15-6.81 Southeast Asia11146.239863.93-11.5 Mexico3535.143136.6-11.27 Total63129.3357660.07-8.66

13 Scenario 3: Impact on Prices ($/MT) Exporting CountryBase modelScenario 3Deviation (%) United States234.06329.4540.75 Brazil*200.63295.7547.41 Argentina234.14329.5340.74 Rest of South America234.14329.5340.74 Canada244.18339.5739.07 India246.27341.6638.73 Importing Country China278.94374.3334.2 European Union271.05366.4435.19 Southeast Asia278.94374.3334.2 Rest of the World267.77363.1635.62 *Farm Price

14 Scenario 3: Impact on Exports and Imports (thousand MT) Exporting CountryBase modelScenario 3Deviation (%) United States25127.3920181.6-19.68 Brazil26123.1921706.43-16.91 Argentina7325.898353.6614.03 Rest of South America3229.463556.4710.13 Canada1323.41467.0210.85 India059.63- Total63129.3355324.81-12.36 Importing Country China28319.0525273.69-10.75 European Union13810.6512468.6-9.72 Southeast Asia11146.239316.44-16.42 Mexico3535.142966.44-16.09 Total63129.3355324.81-12.36

15 Conclusions In all scenarios, the direction of the impacts was the same. Only change was in the magnitude. U.S. and Brazil -  Biodiesel Production =>  Crushed Soybeans =>  Soybean prices &  Exports Importing Countries -  Soybean prices &  Imports World Trade Decreases

16 Conclusions (Cont.) Future considerations - Dynamic setting would improve our ability to assess the impacts of biodiesel production on the world soybean market - Development of a stronger biodiesel industry will depend on changes in the petroleum prices.

17 Questions? Rafael Costa Ph: 979-845-7277 E-mail: rfcosta@ag.tamu.edu

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