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

Author

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  • Santeramo, Fabio Gaetano
  • Di Gioia, Leonardo
  • Lamonaca, Emilia
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.

Suggested Citation

  • Santeramo, Fabio Gaetano & Di Gioia, Leonardo & Lamonaca, Emilia, 2020. "Price responsiveness of supply and acreage in the EU vegetable oil markets: policy implications," MPRA Paper 103199, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:103199
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    2. Fabio G. Santeramo & Monica Delsignore & Enrica Imbert & Mariarosaria Lombardi, 2023. "The Future of the EU Bioenergy Sector: Economic, Environmental, Social, and Legislative Challenges," International Review of Environmental and Resource Economics, now publishers, vol. 17(1), pages 1-1–52, April.
    3. Santeramo, Fabio Gaetano & Bozzola, Martina & Lamonaca, Emilia, 2020. "Impacts of Climate Change on Global Agri-Food Trade," 2019: Recent Advances in Applied General Equilibrium Modeling: Relevance and Application to Agricultural Trade Analysis, December 8-10, 2019, Washington, DC 339375, International Agricultural Trade Research Consortium.
    4. Fabio Gaetano Santeramo & Emilia Lamonaca, 2021. "Food Loss–Food Waste–Food Security: A New Research Agenda," Sustainability, MDPI, vol. 13(9), pages 1-7, April.
    5. Fabio Gaetano Santeramo & Dragan Miljkovic & Emilia Lamonaca, 2021. "Agri-food trade and climate change," Economia agro-alimentare, FrancoAngeli Editore, vol. 23(1), pages 1-18.
    6. Wu, You & Ren, Wenting & Wan, Jieru & Liu, Xiaoxue, 2023. "Time-frequency volatility connectedness between fossil energy and agricultural commodities: Comparing the COVID-19 pandemic with the Russia-Ukraine conflict," Finance Research Letters, Elsevier, vol. 55(PA).
    7. Ostashko, Tamara & Kobuta, Iryna & Olefir, Volodymyr & Lienivova, Hanna, 2022. "Evaluation of the results and analysis of the impact of the DCFTA with the EU on agricultural trade in Ukraine," Agricultural and Resource Economics: International Scientific E-Journal, Agricultural and Resource Economics: International Scientific E-Journal, vol. 8(4), December.
    8. Kamil Czwartkowski & Arkadiusz Wierzbic & Wojciech Golimowski, 2022. "Quality, Key Production Factors, and Consumption Volume of Niche Edible Oils Marketed in the European Union," Sustainability, MDPI, vol. 14(3), pages 1-17, February.

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    More about this item

    Keywords

    Biofuel; Land Use Change; Price elasticity; Vegetable oils;
    All these keywords.

    JEL classification:

    • O13 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Agriculture; Natural Resources; Environment; Other Primary Products
    • P28 - Political Economy and Comparative Economic Systems - - Socialist and Transition Economies - - - Natural Resources; Environment
    • Q21 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation - - - Demand and Supply; Prices
    • Q42 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Alternative Energy Sources

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