A Global Analysis of Energy Prices and Agriculture

A multiregion computable general equilibrium (CGE) model was used to assess the longrun effects of higher energy prices on agricultural production, prices, and trade. An increase in the price of energy enters farmers' cost functions through direct energy use and through the indirect influence of energy prices on intermediate inputs, especially fertilizers. The multiregion feature of the model allows us to include the effects of energy price shocks on economies of other regions and to assess price changes in a global context. Because farming is highly energy intensive, agricultural output falls more than output in the manufacturing and services sectors of each region of the model. Real returns to farmland, a good indicator of farm welfare, fall in each of the four regions