Biofuels and Food: Can Brazilian Ethanol Production Affect Domestic Food Prices?

Abstract

This paper examines the impacts of Brazilian domestic ethanol production over several local agricultural food commodities, using a structural autoregressive model with error correction (VECM). Other variables are included in the model, as oil prices and exchange rate. Overall, results point out that Brazilian ethanol has low impact over domestic food commodities prices, even lesser than oil and exchange rate impacts. Simulated shocks on ethanol does not seems to have significant influence over commodities prices. Results suggest that the concern over biofuel and food debate has not much meaning in the Brazilian ethanol context.