Introduction

Biofuel policies remain one of the most misunderstood and controversial set of government actions that has ever impacted contemporary food commodity price and policy analysis. The goal of this book is to rectify this by carefully explaining how it all happened. There have been eight years of turmoil in world food grain/oilseed prices. Biofuel policies effectively began a new (modern) era for agriculture, particularly affecting grains/oilseed prices directly. It all started in late 2006 with the six-month boom in corn prices and by the second half of 2007, all food commodity prices caught fire, tripling from their 2005 levels, followed by a collapse in prices in the second-half of 2008 and early 2009. Economists quickly pointed out that this was just another boom and bust as in previous decades, with sectoral supply/demand shocks, inventory adjustments, and macro-economic factors explaining pretty much everything. However, then food commodity prices marched straight back up in 2010–2011 and were still high in 2012. Even in 2013, with record world grain supplies and stocks, prices were relatively high with corn prices double their historical levels prior to late 2006 and commentators were puzzled by the entire grain-oilseed complex into 2014, with exclamations like “beans are in the teens,” how can that be? Well, because this time it is different. And the difference is simply biofuel policies.