In the first decade of the 21^st century, global production of ethanol and biodiesel increased nearly tenfold. If that trend continues, says Rosamond L. Naylor, director of Stanford University’s Center on Food Security and the Environment, national biofuels policies will have an increasingly powerful impact on food prices, food security, energy security, and rural incomes in the developing world.

During a two-hour symposium held on the Stanford campus last Wednesday, Naylor addressed the role of biofuels in global food price volatility and the implications of biofuels development in rural Africa and Asia. Although she acknowledged that global income and population growth have contributed to increased demand for biofuels, she also emphasized “the unbelievable dominance of policy” in driving current trends.

“The main part of this that I think is so significant is the use of mandates,” Naylor said. “Policies such as the United States’ Renewable Fuels Standard (RFS), which sets a national target of using 15 billion gallons of corn-based ethanol per year by 2015, have reshaped price and supply dynamics in both food and fuel markets. “

“When you think about the fact that the US provides half of the world’s corn…the fact that we’re using so much in our gas tanks, biofuels really is changing the nature of global markets,” Naylor said. Policies that fix demand for corn from the ethanol market, she explained, have a destabilizing effect on corn prices, especially in the face of supply shortages.

“When you have mandates you have a quantity that you’re absolutely insisting you use, regardless of the price,” she said. “That inelastic demand leads to more volatile prices with supply shocks.”

Because of the substitutability of basic food commodities, Naylor said, price volatility in the corn market has far-reaching consequences. “Prices of corn ripple through all of the world food economy markets…it affects the demand and supply of wheat and rice and soy, and other things,” she explained. And for poor households in the developing world, she said, “it has big income effects…when you’re spending 70 to 80 percent of your budget on food, you’re going to be hurt the most.”

However, Naylor also noted that biofuel mandates in the developed world could provide valuable market opportunities for developing-country farmers.

In rural Africa and Asia, she said, farmers “see the US having a big mandate, EU having a big mandate, and they think, can they supply into that mandated need?”

For now, it seems, the answer is “maybe.” In Africa, for example, efforts are underway to increase the use of jatropha – an inedible, drought-resistant shrub – as a biofuel feedstock. But Naylor said that low yields and high labor costs are likely to severely limit the economic returns from jatropha-based biofuels.

And in marginal growing conditions, the use of more conventional feedstocks is often restricted by resource availability. In India, for example, where almost all sugarcane is grown under irrigated conditions, expansion of sugarcane area to supply the ethanol market could lead to water shortages. Even if these countries can make large-scale biofuel production economically viable, the benefits to poor farmers could vary widely depending on the structure of the market.

“The implications of biofuel development are going to be quite different,” Naylor said, “depending on the organization of the value chain.”

Dr. Siwa Msangi, a Senior Research Fellow with the International Food Policy Research Institute, agreed. In comments following Naylor’s presentation, Msangi said biofuel development contributes most effectively to rural income growth “when you can have vertical integration…people all along the value chain have to be making money.”

Msangi also noted that commodity price increases, including those driven by ethanol mandates, could benefit small farmers if they are controlled and predictable. “Sharp, fast, sudden price rises – those are the ones that are bad for consumers,” he explained. But prices rises “can be positive…especially if those price rises can be gradual and sustained over time, because that gives people the opportunity to mobilize resources to make use of higher returns.” For example, small farmers at the local or national level can increase their production of crops in high demand for biofuel production.

The emerging connections between agriculture and energy markets are complex, Msangi said, but can be advantageous if handled carefully. “If there are good opportunities for agribusiness, I think there’s a case for taking them,” he said, “but also for being aware of the context and all the issues.”

This was the eighth talk in FSE’s Global Food Policy and Food Security Symposium Series. 

As the Arab world undergoes an unprecedented period of political transition, many are looking towards a new development model to spur economic growth and social advancement. The Program on Arab Reform and Democracy (ARD) at Stanford's Center on Democracy, Development, and the Rule of Law examined this question during its third annual conference on April 26-27, 2012 at Stanford University. The conference featured leading academics, practitioners, and activists, who looked beyond economics to present a more integrated framework for development.

According to ARD Program Manager Lina Khatib, "A goal of the conference is to present an integrated approach to development in the Arab world, particularly in places witnessing democratic transition, which links social, political, and economic factors."

The conference included a diverse array of speakers hailing from the political and social sectors, representing youth leaders, religious minorities, women's rights advocates, and civil society representatives, who joined economists to discuss new regional frameworks for development.

Conference speakers included: Mona Makram Ebeid, who has a long and distinguished career as a parliamentarian in Egypt, commenting on the challenges facing minority rights in democratic transition; Hedi Larbi, director of the Middle East department at the World Bank, who will address the issue of oil dependency and how it constrains economic development in the Gulf region; Libyan NGO leader Rihab Elhaj who co-founded The New Libya Foundation and who will speak about the important role civil society plays in the development equation; and Valentine Moghadam, professor of sociology at Northeastern University and a leading expert on gender issues, who will examine political development through a gender lens.

To view the complete program and download the presentation documents and conference report, please click here.

What do running a business and flying an airplane have in common?

“Starting a business is like takeoff and cruising,” says Yasunori Kakemizu, a Corporate Affiliates Visiting Fellow at Stanford’s Shorenstein Asia-Pacific Research Center (Shorenstein APARC). “But exiting from it is very difficult—like landing—because you need to try to make a profit.” 

Kakemizu should know. He has spent over a decade promoting business development at Japan’s Sumitomo Corporation and its affiliate company Jupiter Telecommunications (J:COM). He is also currently training in his free time for his pilot’s license.

Assistant to the general manager of the Cable TV Department in Sumitomo’s Media Division, Kakemizu has spent the past year at Stanford studying the strategies of major American cable companies in adapting to industry changes like the rise of online streaming media. He has examined, for example, the launch of Comcast’s Xfinity streaming service, and how the company has successfully grown it into a profitable part of its business.

“I’m looking for lessons J:COM and other affiliates can use in the next steps of their own streaming services, which is still relatively new in Japan,” Kakemizu says.

Kakemizu is also taking advantage of Stanford’s close ties to Silicon Valley by attending entrepreneurship seminars and enrolling in classes like cloud computing and investment finance. He is fascinated by the opportunities Stanford students have to work on projects with Silicon Valley companies, and the important role Stanford plays in the regional and global business world.

“This university gathers people from around the world and educates them on how to create new companies,” he says. “They then transmit this knowledge globally.”

During the academic year, Kakemizu has enjoyed taking part in the Corporate Affiliates Program site visits to cutting-edge local tech companies, such as Facebook. He found the visit to Cypress Envirosystems, a company that merges digital technology with older HVAC analog technology, especially intriguing.

“Most businesses are ‘forward thinking,’ but they’re focusing on older technologies,” Kakemizu says. “As a result, they don’t have any market competitors. From a business point of view, their strategy is very clever.”

As the academic year winds down, Kakemizu will wrap up his research project and present the results at a seminar. He and the other Visiting Fellows will have a chance to receive feedback and respond to questions from Shorenstein APARC faculty.

Kakemizu will also finish up his pilot’s license training before he returns to Japan. If you hear an airplane flying over campus one day this spring, it might just be him.

“The view of Stanford from the air is very beautiful,” he says.

A once-a-day pill to help prevent HIV infection could significantly reduce the spread of AIDS, but only makes economic sense if used in select, high-risk groups, Stanford researchers conclude in a new study.

The researchers looked at the cost-effectiveness of the combination drug tenofovir-emtricitabine, which was found in a landmark 2010 trial to reduce an individual’s risk of HIV infection by 44 percent when taken daily. Patients who were particularly faithful about taking the drug reduced their risk to an even greater extent – by 73 percent.

The results generated so much interest that the Stanford researchers decided to see if it would be cost-effective to prescribe the pill daily in large populations, a prevention technique known as pre-exposure prophylaxis, or PrEP.

They created an economic model focused on gay men, as they account for more than half of the estimated 56,000 new infections annually in the United States, according to the Centers for Disease Control and Prevention.

“Promoting PrEP to all men who have sex with men could be prohibitively expensive,” said Jessie Juusola, a PhD candidate in management science and engineering in the School of Engineering and first author of the study. “Adopting it for men who have sex with men at high risk of acquiring HIV, however, is an investment with good value that does not break the bank.”

For instance, using the pill in the general population of gay men would cost $495 billion over 20 years, compared to $85 billion when targeted to those at particularly high risk, the researchers found. The study will be published in the April 17 issue of the Annals of Internal Medicine.

Senior author Eran Bendavid, an affiliate of Stanford Health Policy at the Freeman Spogli Institute, said the results are a departure from a previous study. Earlier research found PrEP was not cost-effective when compared with other commonly accepted prevention programs.

The new Stanford study differs in a few important respects, taking into consideration the decline in transmission rates over time as more individuals take the pill. The Stanford team also assumed individuals would stop taking PrEP after 20 years, not stay on the drug for life, as the previous study had assumed.

The pill combination, marketed under the brand name Truvada, is widely used for treating HIV infection. But it wasn’t until a landmark trial, published in the New England Journal of Medicine in November 2010, that individuals and their doctors began to seriously consider using the drug as a preventive therapy. The drug’s maker, Foster City, Calif.-based Gilead Sciences Inc., has filed a supplemental new drug application to market it for prevention purposes.

The CDC issued interim guidelines on the drug’s use in January 2011, suggesting that if practitioners prescribe it as a preventive measure, they regularly monitor patients for side effects and counsel them about adherence, condom use and other methods to reduce their risk of infection.

In developing their model, the Stanford researchers took into account the cost of the drug – about $26 a day, or almost $10,000 a year – as well as the expenses for physician visits, periodic monitoring of kidney function affected by the drug, and regular testing for HIV and sexually transmitted diseases.

“We’re talking about giving uninfected people a drug that has some toxicities, so it’s crucial to have them monitored regularly,” said Bendavid, who is an assistant professor of medicine in Stanford’s School of Medicine.

Without PrEP, the researchers calculated there would be more than 490,000 new infections among gay men in the United States in the next 20 years. If just 20 percent of these men took the pill daily, there would be nearly 63,000 fewer infections.

However, the costs are substantial. Use of the drug by 20 percent of gay men would cost $98 billion over 20 years; if every man in this group took PrEP for 20 years, the costs would be a staggering $495 billion.

Given these figures, the researchers looked at the option of giving PrEP only to men who are at high risk – those who have five or more sexual partners in a year. If just 20 percent of these high-risk individuals took the drug, 41,000 new infections would be prevented over 20 years at a cost of about $16.6 billion.

At less than $50,000 per quality-adjusted life year gained (a measure of how long people live and their quality of life), that strategy represents relatively good value, according to Juusola.

“However, even though it provides good value, it is still very expensive,” she said. “In the current health care climate, PrEP’s costs may become prohibitive, especially given the other competing priorities for HIV resources, such as providing treatment for infected individuals.”

She said the costs could be significantly reduced if the pill is found to be effective when used intermittently, rather than on a daily basis. Current trials are examining the effectiveness of the drug when used less often.

Other co-authors are Margaret L. Brandeau, the Coleman F. Fung Professor of Engineering, and Douglas K. Owens, the Henry J. Kaiser, Jr. Professor at Stanford and senior investigator at the Veterans Affairs Palo Alto Health Care System. Owens also is director of Stanford’s Center for Health Policy and Center for Primary Care and Outcomes Research.

The study was funded by the National Institutes of Health and the Department of Veterans Affairs and supported by Stanford’s departments of Medicine and Management Science and Engineering.