Assessing the impact of US ethanol on fossil fuel markets: A structural VAR approach

Drought, ethanol, and livestock

“…In this case, speculation actually reduces grain prices rather than inflating them. The results are consistent with McPhail (2011), which also indicates no inflated speculative price bubbles in the grain market. In contrast, both the corn and soybean speculative index appear to positively influence poultry prices.…”

“…For a review of the literature see Qiu et al (2011). Recent literature employing a VECM, vector autoregressive (VAR) model, or other models assessing volatility generally concludes that energy markets have a short-run impact on the food market, but no long-run impacts (McPhail, 2011;McPhail et al, 2012;Nazlioglu et al, 2013;Qiu et al, 2012;Saghaian, 2010). Exceptions are Serra et al (2011) who find both a short-and long-run relations between ethanol and corn prices and the conclusion by Serra and Zilberman (2013) inferring that the literature indicates a long-run relation between energy and agricultural commodity prices.…”

Do oil price increases cause higher food prices?

“…9 It is important to note that our sample sizes are too short for any model larger than a bivariate model to be employed. For example, the fully structural VAR approach of McPhail (2011), which in turn builds on Kilian (2010), would be infeasible on data since May 2006.…”

Biofuel and Food-Commodity Prices

“…The authors also found dynamic linkages between food prices as a group and fuel prices as a group with biofuels serving as the link between these markets. McPhail et al developed a joint structural Vector Auto Regression model of the global crude oil, US gasoline, and US ethanol markets, and showed that oil markets respond to ethanol demand shocks differently than to ethanol supply shocks [11].…”