Price responsiveness of supply and acreage in the EU vegetable oil markets: Policy implications

Abstract

Vegetable oil market is becoming of increasing interest in the global biofuel industry. This phenomenon has also interested the European Union (EU), where the growing expansion of biofuel production is affected by political interventions promoting fuel security and environmental goals. Yet, empirical evidence on the impacts that changes in price of one commodity may have on the supply of another commodity are rather scant. We investigate these dynamics for the major sources of biodiesel in the EU and conclude on cross-commodity linkages for palm, rapeseed, soy, and sunflower oils. We also examine the acreage response of domestically produced feedstocks to changes in prices of vegetable oils. Our findings suggest strong and diversified path dependencies among vegetable oils that should be considered in planning sustainable biofuel policies. In particular, the empirical analysis reveals the great relevance of sunflower and soy oils, which show a high price responsiveness, and the high competition in end uses of domestically produced vegetable oils (i.e. rapeseed, soy, and sunflower oils), that tend to be net substitutes in supply. In terms of land use effects, we find that an increase in the price of imported palm oil results in a displacement effect in land devoted to rapeseed cultivation, whereas a surge in the price of sunflower oil decreases the use of land for rapeseed. Land use effects would be relevant in northern EU countries where the production of rapeseed is the most intense. A policy measure in the EU, incentivising the production of renewable and environmental-friendly fuel from sustainable feedstocks, would be positive for the domestic market to the extent that it stimulates the production of vegetable oils (soy and sunflower oils) with the highest direct and indirect emissions saving. However, the expansion of oil palm plantations in extra-EU producing countries and of imports to the EU would determine important impacts in terms of indirect land use change emissions and direct emissions due to increased transports.

The role of the leading exporters in the global soybean trade

“…This finding is in line with several studies that also report land use increases due to the role of international soybean trade (Secchi et al 2011;Hausman 2012;Boerema et al 2016;Santeramo et al 2021). The rapid surge of global soybean production, caused by the growing demand for biofuels, soybean meal for animal feed and cattle ranching, has produced changes in land use patterns.…”

“…These findings are in line with the existing debate on the environmental cost generated by the expansion of soybean production and exports to satisfy the global demand for meat, animal feed and biofuels (Secchi et al 2011;Hausman 2012;Boerema et al 2016;Santeramo et al 2021). But our analysis also sheds light on another dimension of this trade-environment issue: there is a high degree of complementarity among the leading exporters of soybeans who have adopted land use expansion as their main strategy to maintain or gain participation in the global market.…”

Food Loss–Food Waste–Food Security: A New Research Agenda

“…Other actions include the redirection of food to people through different channels (e.g., food banks or markets) or to feed animals and to industrial use [40]. A sustainable alternative may be the transformation of food loss and by-products into fertiliser or compost for soil enrichment or into renewable energy: indeed, an increasing amount of biofuels is produced from waste streams from the food sector [41,42].…”

Agri-food trade and climate change

“…Indeed, lowlatitude countries may have less potential to adapt; for instance, they are generally characterised by warmer climate and may have difficulties in producing crops that perform better in climates still warmer (Reilly and Hohmann, 1993). The indirect effects of changes in climate on crop yields are mainly related to increases in the cost of inputs and of factor productivity (McCarl and Hertel, 2018), but effects due to land use changes should be not neglected (Santeramo and Searle, 2019;Santeramo et al, 2020b). Climate changes also affect the livestock sector: impacts are evident, for instance, on milk production (Key and Sneeringer, 2014), disease and parasites (Mu et al, 2013), feed intake and feed supplies (e.g.…”