Impact of ethanol mandate on sorghum prices in Queensland

Summary

Models of the impacts of the proposed Fuel (Ethanol Content) Bill 2010 in Queensland on grain sorghum prices; farm-gate prices of livestock and livestock products; and retail prices for beef, pork, chicken, milk and eggs were developed. The proposal to introduce a 5 per cent and subsequent 10 per cent ethanol mandate would potentially increase costs of production for livestock, reduce international competitiveness of the livestock industries and increase costs to consumers. The study showed differences in impacts between normal and drought years. In normal years, prices of sorghum were estimated to rise by no more than 1.5 per cent at a 10 per cent mandate level. In drought years grain prices could increase by 20 per cent or higher. The impacts on retail prices were modest, with less than a 1 per cent increase in normal years and up to 7 per cent for chicken in a drought year. Because the mandate acts as a tax, it will have distortionary effects on marketing behaviour and will diminish Queensland's international competitiveness in livestock production.