Effects Of Biofuel Development On China's Food Security

Although there has been in a good conditions of food security in China, the biofuel industry is facing the huge impact of imports of soybean and the dilemma of development of bioethanol in the context of global food and energy crisis recently. Considering the development of biofuel as the composition of China food safety system, the effects of its development on the safety of food production, circulation and consumption were studied to explain the series of contradictions and find the chief cause of threat in China food safety from the aspects of food market, production and policy. Also, the purpose of this study is to provide a set of risk analysis solutions on institutional risk of food security policies based on the biofuel development.The development of global biofuels and its impacts on China's food trade and domestic food prices through the international food market were firstly analyzed. Then, the relationship between the latest development of bioethanol and the changes of food security in China was analyzed, based on the systematic assessment on the status of China's food security. Further, the influences of the development of biofuels on price, production and government intervention cost were analyzed in theoretical framework of food security market-oriented allocation cooperated with government regulation. Finally, the impact factors of China's food safety risk on the basis of biofuel development were analyzed and the measures were put forward.The results showed that the investment impulse and consumption growth draw in bio-fuels from United States, Brazil and European Union had become an important engine for agricultural products demand and the key factor to boost international food prices from 2001 to 2008. The development of biofuels has intensified international competition of corn and soybeans, and become one of the important reasons resulting recent high food prices in China through the direct impact on international trade of soybean and other related products.The bioethanol development starts due to the old grain and the difficulty in storage of grain. Government subsidies and policy support play a decisive role in the bioethanol development. During this period, the proportion of China's food-insecure population tended to decline and food safety risk can be characterized as significant cyclical fluctuations. The pressure of arable land is in a tight balance and the problem of food security is mainly reflected by the risk of food price fluctuations. The results of grey relationship analysis showed that the development of bio-ethanol in China from 2002 to 2008 had a positive impact of food security, contributing to raise food security levels. China's subsidy for bioethanol can play a role in decreasing the food security risks, but it will negatively affect other aspects of food security.China's food prices fluctuated in cycle with its amplitude being magnified. These fluctuations have the characteristics of distinct phases and cobweb. China's prices of bio-ethanol and corn have formed direct transmission and long-term equilibrium relationship, leading more closely complex linkages between energy and food markets. On the conditions in 2008, production of domestic fuel ethanol will increase to 10 million tons, prices of domestic food will rise by 4.78% and imports of food will increase by 8.78%. Because of high financial cost of domestic food production and difficulty in ensuring large-scale food imports source, the development of bio-fuel will bring the food safety risk.Meanwhile, the development of China's bioethanol is an important reason that leads to the increase in proportion of corn acreage and causes the competitive alternative to other food crops. So it has become an important factor affecting food production structure and benefits. From the results of model prediction, it is founded that the proportion of corn acreage will reach 42.3 ~ 62.5%, and net income of per acre corn production will increase by 15.4 ~ 65.6%, reaching 293.0 ~ 420.6 Yuan, if the production of fuel ethanol in China reaches 4~10 million tons keeping the other conditions with those in 2008. However, the proportion of acreage of subsistence crops (rice and wheat) accounting for the total acreage of rice, wheat and corn will drop to 57.7 ~ 37.5%, causing a significant negative impact on food security.China's payout level of fiscal cost of food security is determined both by fiscal policy of food security and financial power. During the 30 years since reforming and opening up, China's fiscal cost of food security is increasing by an average annual rate of 12.11%, while its proportion accounting for total financial expenditure is falling by average 10.8 percentage points. The results of empirical analysis showed that China's grain reserves and price intervention policies become the main reasons causing the cost of food security fluctuate. The grain reserves increase by averagely one million tons, the fiscal expenditure will increase 338 million per year. The rise of food price index by one percentage point would bring the increase of fiscal cost of food security by 345 million, while the rise of the grain market price index by one percentage point will cause fiscal costs of food security reduces by 347 million. The development of fuel ethanol in China can objectively reduce storage of old grain and boost food prices. It plays a distinct role in reducing the fiscal cost of food distribution, namely, reduction 118 million for each additional ten thousand tones.The development of biofuels exacerbates food prices fluctuations and arable land competition between crops, leading to food security risks. The development of biofuel in China has come in to being a direct channel for affecting food security risk through the conduction action of corn price fluctuation. The structure change of China's grain acreage because of fuel crops will intensify the food production fluctuation and then lead to the increase of food security risks. Meanwhile, the production of raw materials of biofuel can provide opportunity for farmers to increase income and become the major driving force to improve the allocation efficiency of agricultural production resources, food productivity and optimize the agricultural structure. The key to solve the above problems is how to optimize the fiscal costs of food security to achieve the coordinated development of energy security and food security in the future in China. It can be done in the following two aspects: firstly, it is the fundamental way that taking food security as the goal to develop biofuels and improving the efficiency of agricultural production. Secondly, it is necessary to improve the efficiency of grain market regulation and reduce fiscal costs of food security resulted from direct price intervention by development of biofuel.