Asymmetric Price Volatility Interaction between U.S. Food and Energy Markets

Saghaian, Sayed H.; Nemati, Mehdi; Walters, Cory; Chen, Bo

doi:10.2139/ssrn.2906336

Cited by 28 publications

(31 citation statements)

References 31 publications

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“…These outcomes suggest that the future prices can be used for risk management purpose. Saghaian et al (2018) also confirmed the volatility spillover between the corn and ethanol markets. The authors showed that the relationship is bidirectional.…”

Section: Literature Reviewsupporting

confidence: 58%

Modeling the Impact of Agricultural Shocks on Oil Price in the US: A New Approach

Hồ

et al. 2019

JRFM

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The current literature has generally considered prices of the agricultural commodity as an endogenous factor to crude oil price. As such, the role of the agricultural market in the energy sector has been largely ignored. We argue that the expansion of agricultural production may trigger a significant increase in oil price. In addition, the world has recently witnessed a growth in biofuel production, leading to an increase in the size of the agricultural sector. This study is conducted to examine the impact of different agricultural shocks on the oil and agricultural markets in the US for the period from 1986 to 2018. The study utilizes the Structural Vector Autoregressive (SVAR) model to estimate the relationship between the agricultural market and the crude oil market. Moreover, the variance decomposition is also used to quantify the contribution of agricultural demand shocks on oil price variations. Findings from this paper indicate that different agricultural shocks can have different effects on oil price and that corn use in ethanol plays an important role in the impact of corn demand shocks on oil price. We find evidence that the agricultural market can have an impact on oil prices through two main channels: indirect cost push effect and direct biofuel effect. Of these, the biofuel channel unexpectedly suggests that the expansion of bioethanol may in fact foster the dependency of the economy on fossil fuel use and prices.

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Section: Literature Reviewsupporting

confidence: 58%

Modeling the Impact of Agricultural Shocks on Oil Price in the US: A New Approach

Hồ

et al. 2019

JRFM

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“…Similar findings are confirmed by Merkusheva and Rapsomanikis (2014) who consider corn as quasi-fixed input in the production of ethanol, and thus its price can influence the price of ethanol. Saghaian et al (2018) also show that corn-ethanol links exist and corn and ethanol price volatility influence each other. Given a change in the corn price, ethanol prices respond to a change in corn prices fast and adjust to a change by 22 percent each month.…”

Section: Methodsmentioning

confidence: 75%

Food-Biofuels Interactions: The Case of the U.S. Biofuels Market

Kapustová

Kapusta

Bielik

2018

AOL

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Corn refers to the main feedstock for U.S. biofuels production and together with soybean oil, as typical biofuel food commodity that can be converted into biodiesel, accounts for over 90 percent of biofuels production in the United States. The paper focuses on the nexus of agri-food and energy markets in U.S. and investigates the interrelationships between the biofuel prices and prices of soybean oil, corn and wheat. Co-integration analysis and vector error correction model are carried out in order to investigate the relationship between the price series. The results show that biofuels and food price levels are co-integrated in the long run. These links show that food prices increment with a rise in biofuels prices. Additionally, not only food prices are determined by biofuels prices, but also vice versa.

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“…The study suggests that oil prices are more likely to influence corn and soybean prices in the long term than in the short term. Saghaian et al [29] find evidence of volatility transmission between oil, corn, and ethanol prices using the BEKK (Baba, Engle, Kraft, and Kroner)-multivariate generalized autoregressive conditionally heteroskedastic (BEKK-MGARCH) approach [30]. Yahya, Oglend, and Dahl [31] found that soybean oil, soybeans, and corn demonstrated the strongest dependence on crude oil returns in the post-2006 period, whereas the parameters of dependencies were low in the pre-2006 subsample.…”

Section: Introductionmentioning

confidence: 99%

The Determinants of Risk Transmission between Oil and Agricultural Prices: An IPVAR Approach

Hồ

Nguyen

et al. 2020

Agriculture

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Previous empirical studies have generally considered biofuel as a main factor in changes in the relationship between oil and agricultural prices because these changes happened after U.S. biofuel policies were implemented. However, it has been argued that other economic factors can trigger the correlation of these two markets. This study was conducted to examine the transmission mechanisms that influence the relationship between oil and agricultural prices. This paper used the interacted panel vector autoregressive framework, which allowed us to investigate the effect of biofuel production under different regimes of exchange rates and global economic activities. The responses of agricultural prices to oil prices at different levels of biofuel production, global economic activity, and exchange rates were examined in this paper. Data on prices for 10 agricultural commodities—barley, beans, corn, cotton, oats, rice, sorghum, soybean, sunflower, and wheat—from January 2000 to May 2019, were used in this study. Our findings indicate that oil prices can affect agricultural prices through biofuel and exchange rates. Moreover, the effect of biofuel depends on the level of global economic activity and exchange rates. We offer some policy implications on the basis of our findings in this study.

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Asymmetric Price Volatility Interaction between U.S. Food and Energy Markets

Cited by 28 publications

References 31 publications

Modeling the Impact of Agricultural Shocks on Oil Price in the US: A New Approach

Modeling the Impact of Agricultural Shocks on Oil Price in the US: A New Approach

Food-Biofuels Interactions: The Case of the U.S. Biofuels Market

The Determinants of Risk Transmission between Oil and Agricultural Prices: An IPVAR Approach

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