Abstract
Crop prices in the United States (USA), and especially corn prices, have been displaying important changes in the last 10 years, after the ethanol mandate in 2005. Motivated by these significant price changes, there has been a growing interest in the study of price transmission from oil prices to agricultural commodity prices. In this contribution, we concentrate on the relationship between the price of oil and the prices of three agricultural commodities that are used for biofuels production: corn, soybeans, and sugar. In doing so, we apply linear Granger causality tests, the nonlinear causality test of Diks and Panchenko (J Econ Dyn Control 30:1647–1669, 2006), and the Brooks and Hinich (J Empir Financ 6:385–404) cross-bicorrelation test to daily data over the period from 1990 to 2016.
Coherent with the previous studies, we find weak linear Granger causality, but strong bidirectional nonlinear causality, especially for the period from 2006 to 2016. Using the Brooks and Hinich test, we also identify the number of epochs (nonoverlapped windows) where there is nonlinear dependence between each pair of series. We find that most cross-bicorrelation windows coincide from 2006 to 2016, indicating that the nonlinear dynamics between the series studied have changed in recent years in the aftermath of the ethanol mandate. Our results provide hints in order to improve our understanding of the effects of the implemented policies in the energy sector on agricultural commodities.
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Acknowledgements
Rafael Romero-Meza and Semei Coronado are grateful for the support of FONDECYT (Project 1111034) and Universidad de Guadalajara for funding this research.
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Coronado, S., Rojas, O., Romero-Meza, R., Serletis, A., Chiu, L.V. (2018). Crude Oil and Biofuel Agricultural Commodity Prices. In: Jawadi, F. (eds) Uncertainty, Expectations and Asset Price Dynamics. Dynamic Modeling and Econometrics in Economics and Finance, vol 24. Springer, Cham. https://doi.org/10.1007/978-3-319-98714-9_5
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