Revised Econometric Analysis- Effects of biofuels mandates on Wheat and Sorghum Prices

Summary

An investigation of the market impacts and influences of biofuel mandates on feedlots was conducted in 2018 under project another MLA project (B.FLT.0167).

This current project aimed to determine the market impact and influences of biofuel mandates on the feedlot sector and the broader Australian community.

The results of this project show that, regardless of updating the data an examining additional variables, there appears to be very little compelling evidence to suggest that the introduction of biofuel mandates in NSW and Queensland have had any significant impact on prices of domestic feed grains.

Objectives

The aim of this project was to investigate revised econometric analysis for the impact of Biofuel mandates on feed grain prices and:

• update the econometric analysis conducted in 2018, utilising more than a year of additional grain price data and Australian Bureau of Agricultural and Resource Economics and Sciences (ABARES) statistics
• explore the effects of additional variables, such as the number of cattle on feed, on wheat and sorghum demand
• investigate alternative credible grain price sources other than Pro-Farmer data.

Key findings

Regardless of updating the data and examining additional variables, there appears to be very little compelling evidence to suggest that the introduction of biofuel mandates in NSW and Queensland have had any significant impact on the price of domestic feed grains.

Given current data, it does not appear that current biofuels policies are having a negative impact on the Australian feedlot sector through the price of grain for feed. 

Even if Australian biofuels policies were greatly strengthened to be more like those in the United States and Europe (which shifted domestic and international grain and oil seed prices, and fuel prices), the much smaller Australian economy would remain a price taker in those markets.

Benefits to industry

This project provided the Feedlot Industry (ALFA) evidence-based information on the impact of biofuel mandates on the feedlot sector and wider community.

MLA action

The feedlot industry and the red meat industry should consider further reviewing the effect of the Queensland mandate on sorghum prices when more data are available.

Future research

Further analysis is desirable, using a reasonably long data time series after introduction of the Queensland mandate, and taking into account a prolonged drought period.