The impact of biomass consumption on US food prices

The Energy Policy Act of 2005 increased the amount of biofuels that must be mixed with commercial gasoline sold in the US to 7.5 billion gallons by 2012. The Energy Independence and Security Act of 2007 further increased this requirement to 36 billion gallons by 2022. These large increases in the production and consumption of biofuels may compel farmers to divert significant quantities of land away from food and feed crops, which, in turn, may lead to a rise in crop prices, feed prices, and hence, overall food prices. Employing structural vector autoregression (SVAR) models and monthly US data for the period 1974:01 to 2019:12, this paper examines the impact of biomass consumption on food prices. We find that since the passing of these two acts, surges in biomass consumption are associated with food price increases in several categories, namely, fruits, beverages, food away from home as well as meat and poultry.