In advance of the third presidential debate, Freeman Spogli Institute center directors thought about key international policy issues that need addressing by presidential candidates Barak Obama and Mitt Romney. FSE center director Rosamond L. Naylor posed the question below among a list of other suggested FSI foreign policy questions to debate:

Should our government help American farmers cope with climate impacts on food production, and should this assistance be extended to other countries – particularly poor countries – whose food production is also threatened by climate variability and climate change?

What to listen for: Most representatives in Congress would like to eliminate government handouts, and many would also like to turn away from any discussion of climate change. Yet this year, U.S. taxpayers are set to pay up to $20 billion to farmers for crop insurance after extreme drought and heat conditions damaged yields in the Midwest.

With the 2012 farm bill stalled in Congress, the candidates need to be clear about whether they support government subsidized crop insurance for American farmers. They should also articulate their views on climate threats to food production in the U.S. and abroad.

Without a substantial crop insurance program, American farmers will face serious risks of income losses and loan defaults. And without foreign assistance for climate adaptation, the number of people going hungry could well exceed 15 percent of the world's population. 

~Rosamond L. Naylor, director of the Center on Food Security and the Environment 

 

Inspired by the spirit of debate, FSE fellows took the opportunity to pose a few additional questions for the candidates. 

Questions from FSE deputy director Walter P. Falcon:

The US now uses more that 40% of its corn crop for biofuel. While some argue this contributes to long-term energy independence, others note that ethanol mandates, along with unfavorable weather, can contribute to higher and more volatile food prices like those seen in recent years. Do you regard the US policy emphasis on biofuels, especially corn-based ethanol, as being a successful program to date? Have the benefits from biofuels outweighed the negative impacts on higher food costs around the world, and do you believe that mandates continue to be the most appropriate policy going forward?

One of the largest agricultural programs in the US is in the form of food stamps to poor consumers. Would you prefer to cap, perhaps even eliminate, the food stamp (SNAP) program? Would you prefer to replace it with a direct cash transfer system? Whom do you think generally should qualify either for food stamps or cash transfers?

Questions from FSE associate director David Lobell:

A major initiative of the Obama Administration has been Feed the Future, which aims at improving food security in other countries. Is the U.S. focused sufficiently on hunger in other parts of the world? Have actions matched rhetoric? Is a $3 billion expenditure on this initiative the right sum in an era of large fiscal deficits in the U.S.?

Question from research scholar Bill Burke:

The United States is viewed by many as a world leader, but its role in foreign assistance is contentious. In dollar terms, the United States consistently gives more foreign assistance than any other donor nation. In 2012, for example, the U.S. provided nearly 34 billion dollars, or more than twice as much as any other country. On the other hand, many criticize the U.S. for contributing relatively little in comparison to other countries when donations are measured as a share of GDP. Some also point out that much of what is labeled foreign assistance is actually military or security assistance, and does not contribute directly towards economic development. Does the U.S. spend too little or too much on foreign assistance, and should a greater proportion of U.S. funding go directly towards poverty reduction and food security?

President Obama and Mitt Romney meet for their third debate to discuss foreign policy on Monday, when moderator Bob Schieffer is sure to ask them about last month's terrorist attack in Libya and the nuclear capabilities of Iran.

In anticipation of the final match between the presidential candidates, researchers from five centers at Stanford’s Freeman Spogli Institute for International Studies ask the additional questions they want answered and explain what voters should keep in mind.

---

What can we learn from the Arab Spring about how to balance our values and our interests when people in authoritarian regimes rise up to demand freedom?  

What to listen for: First, the candidates should address whether they believe the U.S. has a moral obligation to support other peoples’ aspirations for freedom and democracy. Second, they need to say how we should respond when longtime allies like Egypt’s Hosni Mubarak confront movements for democratic change.

And that leads to more specific questions pertaining to Arab states that the candidates need to answer: What price have we paid in terms of our moral standing in the region by tacitly accepting the savage repression by the monarchy in Bahrain of that country's movement for democracy and human rights?  How much would they risk in terms of our strategic relationship with Bahrain and Saudi Arabia by denouncing and seeking to restrain this repression? What human rights and humanitarian obligations do we have in the Syrian crisis?  And do we have a national interest in taking more concrete steps to assist the Syrian resistance?  On the other hand, how can we assist the resistance in a way that does not empower Islamist extremists or draw us into another regional war?  

Look for how the candidates will wrestle with difficult trade-offs, and whether either will rise above the partisan debate to recognize the enduring bipartisan commitment in the Congress to supporting democratic development abroad.  And watch for some sign of where they stand on the spectrum between “idealism” and “realism” in American foreign policy.  Will they see that pressing Arab states to move in the direction of democracy, and supporting other efforts around the world to build and sustain democracy, is positioning the United States on “the right side of history”?

~Larry Diamond, director of the Center on Democracy, Development, and the Rule of Law

---

What do you consider to be the greatest threats our country faces, and how would you address them in an environment of profound partisan divisions and tightly constrained budgets? 

What to listen for: History teaches that some of the most effective presidential administrations understand America's external challenges but also recognize the interdependence between America's place in the world and its domestic situation.

Accordingly, Americans should expect their president to be deeply knowledgeable about the United States and its larger global context, but also possessed of the vision and determination to build the country's domestic strength.

The president should understand the threats posed by nuclear proliferation and terrorist organizations. The president should be ready to lead in managing the complex risks Americans face from potential pandemics, global warming, possible cyber attacks on a vulnerable infrastructure, and failing states.

Just as important, the president needs to be capable of leading an often-polarized legislative process and effectively addressing fiscal challenges such as the looming sequestration of budgets for the Department of Defense and other key agencies. The president needs to recognize that America's place in the world is at risk when the vast bulk of middle class students are performing at levels comparable to students in Estonia, Latvia and Bulgaria, and needs to be capable of engaging American citizens fully in addressing these shared domestic and international challenges.

~Mariano-Florentino Cuéllar, co-director of the Center for International Security and Cooperation

---

Should our government help American farmers cope with climate impacts on food production, and should this assistance be extended to other countries – particularly poor countries – whose food production is also threatened by climate variability and climate change?

What to listen for: Most representatives in Congress would like to eliminate government handouts, and many would also like to turn away from any discussion of climate change. Yet this year, U.S. taxpayers are set to pay up to $20 billion to farmers for crop insurance after extreme drought and heat conditions damaged yields in the Midwest.

With the 2012 farm bill stalled in Congress, the candidates need to be clear about whether they support government subsidized crop insurance for American farmers. They should also articulate their views on climate threats to food production in the U.S. and abroad.

Without a substantial crop insurance program, American farmers will face serious risks of income losses and loan defaults. And without foreign assistance for climate adaptation, the number of people going hungry could well exceed 15 percent of the world's population. 

~Rosamond L. Naylor, director of the Center on Food Security and the Environment

---

What is your vision for the United States’ future relationship with Europe? 

What to listen for: Between the end of World War II and the end of the Cold War, it was the United States and Europe that ensured world peace. But in recent years, it seems that “Europe” and “European” have become pejoratives in American political discourse. There’s been an uneasiness over whether we’re still friends and whether we still need each other. But of course we do.

Europe and the European Union share with the United States of America the most fundamental values, such as individual freedom, freedom of speech, freedom to live and work where you choose. There’s a shared respect of basic human rights. There are big differences with the Chinese, and big differences with the Russians. When you look around, it’s really the U.S. and Europe together with robust democracies such as Canada and Australia that have the strongest sense of shared values.

So the candidates should talk about what they would do as president to make sure those values are preserved and protected and how they would make the cooperation between the U.S. and Europe more effective and substantive as the world is confronting so many challenges like international terrorism, cyber security threats, human rights abuses, underdevelopment and bad governance.

~Amir Eshel, director of The Europe Center

---

Historical and territorial issues are bedeviling relations in East Asia, particularly among Japan, China, South Korea, and Southeast Asian countries. What should the United States do to try to reduce tensions and resolve these issues?

What to listen for: Far from easing as time passes, unresolved historical, territorial, and maritime issues in East Asia have worsened over the past few years. There have been naval clashes, major demonstrations, assaults on individuals, economic boycotts, and harsh diplomatic exchanges. If the present trend continues, military clashes – possibly involving American allies – are possible.

All of the issues are rooted in history. Many stem from Imperial Japan’s aggression a century ago, and some derive from China’s more assertive behavior toward its neighbors as it continues its dramatic economic and military growth. But almost all of problems are related in some way or another to decisions that the United States took—or did not take—in its leadership of the postwar settlement with Japan.

The United States’ response to the worsening situation so far has been to declare a strategic “rebalancing” toward East Asia, aimed largely at maintaining its military presence in the region during a time of increasing fiscal constraint at home. Meanwhile, the historic roots of the controversies go unaddressed.

The United States should no longer assume that the regional tensions will ease by themselves and rely on its military presence to manage the situation. It should conduct a major policy review, aimed at using its influence creatively and to the maximum to resolve the historical issues that threaten peace in the present day.

~David Straub, associate director of the Korea Studies Program at the Walter H. Shorentein Asia-Pacific Research Center

 

Compiled by Adam Gorlick.

Pamela Matson, Dean of the School of Earth Sciences and FSE researcher, discusses agricultural research in the Yaqui Valley, Mexico and how it relates to the Green Revolution with Stanford's Generation Anthropocene. She also reflects upon the politics of sustainable agriculture and how we might go about feeding the 9 billion people we expect in the coming decades.

The United States continues to endure the worst drought to hit the country in over 50 years. Although conditions have improved, 53 percent of the US is still experiencing moderate or worse levels of drought. The United States Department of Agriculture (USDA) projected last week that the drought will reduce the nation’s corn yield by 13 percent and soybean yield by 12 percent. As the world’s largest exporter of corn, soybean and wheat, this major disruption in U.S. supply is already having an impact on global food prices.

Is this summer a glimpse of what our future could look like under a changing climate, and what does that mean for the world’s poor who are disproportionately impacted by volatile food prices? What policy options are available to help avoid a repeat of the 2007-2008 food crisis? I sat down with FSE visiting scholar Thomas Hertel, an agricultural economist from Purdue University, to discuss these questions and related research as he wraps up his sabbatical year here at Stanford.

 

DEAN: The current drought has already had a dramatic impact on US corn prices, exceeding record highs of $8 a bushel. While American consumers are unlikely to feel the impacts until next year, the spike in corn prices has sparked debate over whether to drop or temporarily suspend US ethanol mandates to free up supply and ease the pressure on world food prices. In April, you published a paper in Nature Climate Change with Stanford environmental scientist Noah Diffenbaugh that looked at this very scenario.

How are current biofuel policies affecting the market’s ability to respond to extreme weather events like the current drought?

HERTEL: The remarkable thing about that paper is how timely it was. We predicted a volatile interplay between an extremely hot summer and the Renewable Fuel Standard for corn ethanol, and that is what we are now seeing, with the value of the mandates’ Renewable Identification Numbers (RINs) accruing greater value as the drought deepens. There are increasing calls for a waiver of the mandated 13.2 billion gallons of corn ethanol needed to meet this year’s federal renewable-fuel standards. This new source of demand (about 40 percent of production last year) has absorbed virtually all of the increased output the US has generated over the past eight years. By limiting the ability of commodity markets to adjust to yield fluctuations, biofuel mandates work in exactly the wrong direction. These price spikes are likely to be even larger in the future if these policies are not altered.

 

DEAN: In that same paper you warn that extreme weather events, like the current drought, are likely to become more common and potentially even more intense under a changing climate. To better understand the impacts of climate change on global agricultural production, trade, prices and poverty you have developed a global trade analysis model (GTAP), now used by over 10,000 members. Some of those results were published in a 2010 paper with FSE fellow David Lobell and FSE affiliated researcher Marshall Burke.

What have been some of the most interesting findings to come out of that model?

HERTEL: Prior to the publication of our 2010 paper in Global Environmental Change, most studies of climate change and poverty focused on the likely impact on prices and low income food consumers. Our paper was one of the first to examine the impact on wages and farm incomes. We found that low income farm households in regions of the world that are relatively less hard hit by climate change may actually benefit from the ensuing rise in world prices. Of course, low income consumers worldwide, as well as farmers in the regions hardest hit by climate change, such as Southern Africa and South Asia, will be hurt.

 

DEAN: Poor households in developing countries spend a disproportionately large amount of their disposable income on food. Even small price spikes can have a large impact.

What policies are needed to help protect the world’s poorest from price volatility?

HERTEL: This is an important question. Being a trade economist, I think immediately of trade policies and their role in improving or worsening the situation. From a global perspective, the best thing that can be done is for all regions of the world to share in the needed adjustments to events like the US drought of 2012. If all countries were to adjust their corn use by just a modest  amount, the shortfall could be accommodated more easily. However, the evidence from the 2007-2008 commodity crisis suggests that many countries – most notably India and China – responded to the crisis by adjusting border policies so as to shield domestic consumers from the price rise, thereby failing to share in the adjustment. This, in turn, made the world price rise larger and worsened the situation for low income households in other developing countries.

 

DEAN: In addition to focusing on climate change impacts on agriculture and poverty, you have a long-standing interest in agricultural impacts on the environment, and the role economics can play in mitigating agriculture’s destructive planetary impacts. The latter is particularly important given that agricultural production accounts for 70 percent of global freshwater consumption, 38 percent of total land use, and 14 percent of the world’s greenhouse gas emissions.

How are economic forces impacting the kind of farming we see today?

HERTEL: One of agriculture’s most important impacts on the environment has been its contribution to global greenhouse gas emissions (GHGs). Farming accounts for a disproportionate share of GHGs, including nitrous oxide emissions from fertilizer applications, methane emissions from livestock and paddy rice, as well as indirect emissions from the conversion of tropical forests to agricultural uses. There is little doubt that the globalization of agriculture has contributed to an acceleration of land conversion in some regions which had previously been insulated from world markets. New agricultural technologies offer great hope for moderating such GHG emissions – both by reducing the emissions intensity of agricultural production and by reducing the total amount of land required to feed the world. And there is evidence that more rigorous enforcement of restrictions on land conversion in places like the Amazon can have a tangible impact on global emissions. So the answer lies in a combination of investments, regulations and enforcement. We have explored the potential for agriculture and land-based mitigation policies to contribute to reduced GHG emissions – as well as the implications for food security – in a joint project with the UN-Food and Agriculture Organization. These findings are forthcoming in a paper in the Proceedings of the National Academy of Sciences.

 

DEAN: While at Stanford, you have had the opportunity to work closely with climate and earth system scientists to conduct research on the energy-water-land-agriculture-climate nexus under the umbrella of John Weyant’s Integrated Assessment Modeling (IAM) project and with former Purdue colleague, Noah Diffenbaugh.

How did you enjoy working in such an interdisciplinary environment?

HERTEL: This was the first deeply interdisciplinary experience of my career and it was both challenging and rewarding. Noah is the person who first stimulated my research interest in climate change five years ago. The idea that extreme events could have an important impact on agriculture, food prices and poverty is something that we have been exploring intensively since that time. However, it was only in the context of this sabbatical—with the help of Martin Scherer and Monika Verma—that we were able to really get our teeth into the issue, resulting in the April paper.

 

DEAN: You also taught an interdisciplinary graduate seminar with FSE fellow David Lobell on global agricultural land use change in 2050.

What sort of lessons did you learn from teaching an interdisciplinary seminar?

HERTEL: I really enjoyed the opportunity and the challenge of teaching an interdisciplinary course. I was fortunate to work closely with David Lobell in designing this course, as the structure was different from the typical economics course which I have taught in the past. Teaching the course also changed my perspective on which research questions are most important. Sometimes the points that most intrigue economists are of little broader relevance, while some of those issues which seem obvious to economists are deserving of much greater attention, more thorough investigation and better communication to the broader scientific community. I plan to offer this course when I return to Purdue, and I am also planning to write a textbook based on this course.

 

DEAN: You have also been working on the launch of an open source data program called GEOSHARE (Geospatial, Open-Source Hosting of Agriculture, Resources and Environmental Data).

What does GEOSHARE do and why is it needed?

Hertel: Feeding 9 billion people in 2050 in the face of a changing climate, while preserving the environment and eliminating extreme poverty, is one of the most important challenges facing us today. Yet the data currently available to understand how global and local phenomena affect the agriculture-environment-poverty nexus are insufficient to advance needed discovery and enable effective decision making. In order to address this limitation, we have initiated GEOSHARE. During my time at Stanford I was able to finalize funding for a two-year pilot effort aimed at providing proof of concept. It will prototype this freely available, global, spatially explicit database which will be accompanied by analysis tools and training programs for new scientists, decision makers, and development practitioners.

 

What will you take away with you from your time spent here on the Farm?

HERTEL: I greatly enjoyed my colleagues and conducting research, auditing courses (including a course in Geographical Information Science and David Lobell’s course in Climate and Agriculture) and teaching. But I also had great fun cycling and hiking in the hills around Palo Alto, windsurfing, singing in a local choir, and partaking of all that San Francisco has to offer. This is a lovely place to spend a sabbatical leave!

Indonesia’s rainforests are among the world’s most extensive and biologically diverse environments. They are also among the most threatened. An increasing population and growing economy have led to rapid development. Logging, mining, colonization, and subsistence activities have all contributed to deforestation.

But the recent and booming expansion of palm oil plantations could cause the most harm to the rainforests, and is generating considerable concern and debate among industry leaders, environmental campaigners and scholars.

Joanne Gaskell in Sumatra, Indonesia.

Joanne Gaskell has dedicated her graduate studies to better understanding the tradeoffs and demand side of this dilemma. The doctoral candidate and researcher for the Center on Food Security and the Environment recently defended her thesis before an audience of advisers, friends, and fellow students from Stanford’s Emmett Interdisciplinary Program in Environment and Resources (E-IPER).

“You need to understand the economics and politics of palm oil demand if you want to understand the regional dynamics of oil production and associated environmental impacts,” Gaskell said. “From a conservation perspective, this is as important as understanding supply since demand patterns affect the incentives facing producers.”

In the past 25 years, palm oil has become the world’s leading source of vegetable oil. Indonesia is currently the world’s top palm oil producer. Since the 1980s total land area planted to palm oil has increased by over 2,100 percent growing to 4.6 million hectares – the equivalent of six Yosemite National Parks. Plantation growth has predominately occurred on deforested native rainforest with major implications for global carbon emissions and biodiversity.

And Gaskell projects the demand for palm oil for food will double by 2035, requiring more than 8 million new hectares for production. Plantation expansion has already begun in Kalimantan and Papua, and Indonesian companies are now looking beyond Indonesia for new investment opportunities. Just as palm oil production spread from Malaysia to Indonesia to escape rising land and labor costs, palm oil production is now spreading to parts of Africa, where the crop is native, and Latin America.

Demand for palm oil is quickly rising in Asian markets – notably India and China – where it is used for cooking and industrial processes. Indonesia has the highest level of per capita palm oil consumption, resulting not just from population and income growth, but also from government policies that promoted the use of palm oil instead of coconut cooking oil.

“Taste preferences and investment more than international prices have driven palm oil demand in Indonesia,” Gaskell said.

Biodiesel production and speculation have also contributed to the rapid expansion of palm oil plantations, but to a lesser extent. Gaskell said the success of palm-based biodiesel hinges on remaining cheaper than petroleum diesel and whether governments subsidize the industry, as the United States has done with corn and soybean farmers.

Interest in palm oil as a cleaner burning fuel is already waning in Europe and the United States. The short-term carbon costs of deforesting and preparing land, fertilizing and managing the crops, then processing and transporting them outweigh the benefits. This is particularly true when palm oil plantations are grown on peat soils that release potent methane gas when drained for growing palm oil.

Palm oil seedlings ready for planting. Photo credit: Wakx/flikr

Growing plantations on ‘degraded land’, land that had been previously converted for other purposes, such as logging, is a much more favorable option over forest expansion. In theory, there is an abundance of degraded areas that can be profitably converted into palm oil plantations. But there are hurdles: The areas are not necessarily contiguous, making it difficult to organize a plantation, and ownership rights in these areas are often contested.

Palm oil’s considerable productivity and profitability offers wealth and development where help is most needed. Half of Indonesia’s population lives on less than $2 a day. But along with the negative ecological impacts, palm oil production increases competition for land and could exacerbate inequalities between the rich and the poor.

Gaskell believes sustainable expansion strategies are possible, and says smaller mills and different processing technologies are needed so production is affordable in scaled-down, more distributed systems.

Palm oil plantation in Cigudeg, Indonesia. Photo credit:  Achmad Rabin Taim/flickr

Her work is feeding an international conversation about palm oil production. The Roundtable on Sustainable Palm Oil (RSPO), an international organization of producers, distributors, conservationists and other stakeholders, has promoted better ways of managing palm oil production and encouraging transparency and dialogue among corporate players, governments, and NGOs.

“We need to protect the most ecologically valuable landscapes from agricultural production and we need to make sure that, in areas where palm oil agriculture occurs, there are ecological management strategies in place such as riparian buffers, wildlife corridors, and treatment systems for mill effluent,” she said. “From a food security perspective, small palm oil producers, who might be giving up rice production or the production of other food staples, need strategies to minimize the economic risk associated with fluctuating global palm oil prices.” 

Despite accelerating economic growth in India over the last thirty years, India’s structural transformation remains stunted, said economist Hans Binswanger-Mkhize at a May 10 FSE symposium on global food policy and food security. Unlike China, urban migration and labor absorption have been slower than expected, especially in the typically labor-intensive manufacturing sector. Formal sector jobs are few and declining as a share of employment, and agricultural employment (and growth) remains low.

The rural non-farm sector has been left to pick up the slack, and has emerged as the largest source of new jobs in the Indian economy. This will likely remain so over the next few decades given that two-thirds of India’s growing population is projected to live in rural areas. Add to the equation the need to increase crop yields by 50 percent under changing climate conditions and it becomes apparent that improving rural incomes and supporting agricultural growth is essential to decreasing poverty and unemployment in India now and in the future.

“The importance of India's rural non-farm sector shows us that structural transformation does not follow a recipe,” said commentator Marianne Banziger, a senior scientist at the International Maize and Wheat Improvement Center (CIMMYT) in Mexico.

While non-farm jobs offer significantly higher wages than farm labor, most jobs are informal and/or insecure (i.e., no health benefits, unemployment insurance or pensions). These jobs go mostly to men 18-26 years old who have some education, while the illiterate and women struggle to transition into this sector. Retail trade and transport, construction, and services (internet and phone booths, maintenance and repair of motor vehicles, and hotels and restaurants) are growing especially fast, partly due to urban-rural spillovers, but manufacturing is still only 20 percent of non-farm jobs.

“For rural households, non-farm employment is not distress employment, but a profitable diversification strategy,” said Binswanger-Mkhize. “At the same time, it has selectively absorbed young males into wage employment, decreased the number of farmers, and increasingly concentrated women in agriculture, contributing to a progressive feminization of agriculture.” 

As a result, farms on average have declined in both land and household size, and have moved toward the production of higher-valued goods and a modern model of part-time farming. This transformation concerned Banziger.

“Will the urban and land-less poor be held hostage by part-time farmers?” she asked.

Banziger projects in the next 20 years food and energy price inflation will likely exceed the income growth of the urban poor. Food price increases will push net consumers, who spend a third of their income on food staples, back into poverty.

“For food prices to remain constant, farmers yield gains will have to increase by 50 percent on essentially the same land area, with less water, nutrients, energy, labor and as climate changes,” said Banziger. "The more we delay investments, the steeper the challenge.”

Fortunately, small farmers are now better equipped to respond to these challenges, but are still limited by scale. Precision irrigation and fertilization technology coupled with remote sensing and cell phone technology enable better yield predictions that affect nutrient application. Better farm-level nutrient management increases farmer income and nutrient use efficiency.

For an optimistic Indian future to be realized government policy must support ways in which households increase their incomes, said Binswanger-Mkhize. A positive outcome for rural areas depends on continued urban spillovers, and on better agriculture and rural development policies, institutions, and programs.

Productivity growth needs to be sustained at very high levels. This requires more responsive, accountable, and better-financed research systems, more diversification of agriculture, and larger, better financed, and more accountable agricultural extension system. India currently employs one-seventh the number of extension workers as China.

"Rapid policy and institutional change will be required to overcome poor performance of many government programs," said Binswanger-Mkhize. "Current subsidies to fertilizer, electricity, water, and support to crop prices are already large, but are an inefficient means to transfer income to farmers."

Direct payments may be a more efficient way of supporting income growth. This is beginning to happen with fertilizers, but should be extended to electricity and food subsidies, said Binswanger-Mkhize.

“Maybe the people who have been disadvantaged in the past are the core for future change. With appropriate support, smallholder farmers can become the engines for agricultural productivity growth and transform India's growing economy,” concluded Banziger. 

In the first decade of the 21^st century, global production of ethanol and biodiesel increased nearly tenfold. If that trend continues, says Rosamond L. Naylor, director of Stanford University’s Center on Food Security and the Environment, national biofuels policies will have an increasingly powerful impact on food prices, food security, energy security, and rural incomes in the developing world.

During a two-hour symposium held on the Stanford campus last Wednesday, Naylor addressed the role of biofuels in global food price volatility and the implications of biofuels development in rural Africa and Asia. Although she acknowledged that global income and population growth have contributed to increased demand for biofuels, she also emphasized “the unbelievable dominance of policy” in driving current trends.

“The main part of this that I think is so significant is the use of mandates,” Naylor said. “Policies such as the United States’ Renewable Fuels Standard (RFS), which sets a national target of using 15 billion gallons of corn-based ethanol per year by 2015, have reshaped price and supply dynamics in both food and fuel markets. “

“When you think about the fact that the US provides half of the world’s corn…the fact that we’re using so much in our gas tanks, biofuels really is changing the nature of global markets,” Naylor said. Policies that fix demand for corn from the ethanol market, she explained, have a destabilizing effect on corn prices, especially in the face of supply shortages.

“When you have mandates you have a quantity that you’re absolutely insisting you use, regardless of the price,” she said. “That inelastic demand leads to more volatile prices with supply shocks.”

Because of the substitutability of basic food commodities, Naylor said, price volatility in the corn market has far-reaching consequences. “Prices of corn ripple through all of the world food economy markets…it affects the demand and supply of wheat and rice and soy, and other things,” she explained. And for poor households in the developing world, she said, “it has big income effects…when you’re spending 70 to 80 percent of your budget on food, you’re going to be hurt the most.”

However, Naylor also noted that biofuel mandates in the developed world could provide valuable market opportunities for developing-country farmers.

In rural Africa and Asia, she said, farmers “see the US having a big mandate, EU having a big mandate, and they think, can they supply into that mandated need?”

For now, it seems, the answer is “maybe.” In Africa, for example, efforts are underway to increase the use of jatropha – an inedible, drought-resistant shrub – as a biofuel feedstock. But Naylor said that low yields and high labor costs are likely to severely limit the economic returns from jatropha-based biofuels.

And in marginal growing conditions, the use of more conventional feedstocks is often restricted by resource availability. In India, for example, where almost all sugarcane is grown under irrigated conditions, expansion of sugarcane area to supply the ethanol market could lead to water shortages. Even if these countries can make large-scale biofuel production economically viable, the benefits to poor farmers could vary widely depending on the structure of the market.

“The implications of biofuel development are going to be quite different,” Naylor said, “depending on the organization of the value chain.”

Dr. Siwa Msangi, a Senior Research Fellow with the International Food Policy Research Institute, agreed. In comments following Naylor’s presentation, Msangi said biofuel development contributes most effectively to rural income growth “when you can have vertical integration…people all along the value chain have to be making money.”

Msangi also noted that commodity price increases, including those driven by ethanol mandates, could benefit small farmers if they are controlled and predictable. “Sharp, fast, sudden price rises – those are the ones that are bad for consumers,” he explained. But prices rises “can be positive…especially if those price rises can be gradual and sustained over time, because that gives people the opportunity to mobilize resources to make use of higher returns.” For example, small farmers at the local or national level can increase their production of crops in high demand for biofuel production.

The emerging connections between agriculture and energy markets are complex, Msangi said, but can be advantageous if handled carefully. “If there are good opportunities for agribusiness, I think there’s a case for taking them,” he said, “but also for being aware of the context and all the issues.”

This was the eighth talk in FSE’s Global Food Policy and Food Security Symposium Series.