A new vision for agriculture
momagri, movement for a world agricultural organization, is a think tank chaired by Christian Pèes.
It brings together, managers from the agricultural world and important people from external perspectives,
such as health, development, strategy and defense. Its objective is to promote regulation
of agricultural markets by creating new evaluation tools, such as economic models and indicators,
and by drawing up proposals for an agricultural and international food policy.
Focus on issues

Flexible biofuel policies are possible

Frédéric Courleux, les Echos, 27 juillet 20161

Energy demand management systems have proven effective. They could be used as a model for more flexible policies for biofuel blending.

The end of the commodity “super cycle” affects agricultural markets across the board. In this time of crisis, proposals for reviewing agricultural policies are on the rise with one key word: searching for more flexibility in existing instruments - CAP aids and biofuel production.

The first case involves encouraging countercyclical aid offered to farmers only when prices are low. This type of instrument is widely used in the United States, while on the Old Continent it is preferred to throw money out the window when prices cover costs, and aid seems to have nothing to do with production.

The second case involves returning to the process of “food versus fuel” on a more rational basis working from the observation that we are producing as much biofuel as during the worst food crisis of 2008... and that prices still remain low. The reason for this is that over the last ten seasons, world grain production jumped 25% and stocks are at their highest levels since 2001.

Reducing the inelasticity of demand

Biofuel production should mobilize nearly 160 million tonnes this year, equivalent to 8% of world production and half of world trade in grain. The production of biofuels from grain boomed in the 2000s, but it is with the dismantling of stock policies and the structural instability of agricultural markets that lie the causes of the soaring prices of 2007.

Paradoxically with the policies for biofuel blending with conventional fuel and depending on certain modifications, we currently dispose of tools for managing excessive volatility in commodity prices and the adverse effects on global food security from prices that are too high or low.

Indeed, much like energy demand management systems that optimize the power supply by compensating those who agree not consume during peak periods, making biofuel blending policies more flexibile has several advantages. It would reduce demand inelasticity for agricultural produce, a major source of instability on agricultural markets. It would also continue the development of renewable energy while reducing the connection between agricultural prices and oil prices. Obviously the rules for demand management should be implented in advance so as not to cause additional uncertainty in pricing.

Inspiration from by Brazil and the US

This type of mechanism already exists more or less successfully in Brazil and the United States. Thus, when the price of sugar increases excessively, the Brazilian authorities reduce the level of blending with fuel.

In the US, there is a market for RINs (“renewable identification numbers”), these certificates that fuel vendors must provide to demonstrate their compliance with blending obligations, and proposals are regularly made to further promote flexibility. The European Union could learn from these devices to implement flexibility on its biofuels.

Then, these three major agricultural powers would be able to coordinate, at the lowest cost, effective economic mechanisms against excessive changes in agricultural markets. This scheme is based on the belief that a new global governance for agricultural policy is possible and necessary, to replace the faltering Marrakech Accords of 1994.

Advancing on this issue is vital to moving the CAP out of its current impasse, turning flexible biofuel policies into crisis management tools alongside countercyclical direct aid and insurance systems.

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Paris, 14 December 2018