On the Evolving Relationship Between Corn and Oil Prices
Article first published online: 6 MAR 2013
© 2013 Wiley Periodicals, Inc.
Volume 29, Issue 3, pages 344–360, Summer 2013
How to Cite
Elmarzougui, E. and Larue, B. (2013), On the Evolving Relationship Between Corn and Oil Prices. Agribusiness, 29: 344–360. doi: 10.1002/agr.21337
- Issue published online: 3 JUL 2013
- Article first published online: 6 MAR 2013
The authors identified three breaks in the relationship between corn and oil prices. The first break coincides with the second oil crisis. The second break marks the end of the agricultural export subsidy war between the European Union and the United States in the second half of 1980s; the third one occurred at the beginning of the ethanol boom at the very end of the 1990s. The relationship between corn and oil prices tends to be stronger when oil prices are highly volatile and when agricultural policies create less distortion. The ethanol boom strengthened the relation between corn and oil prices, which are cointegrated only in the fourth and last regime. Impulse response functions confirm that corn prices systematically respond to oil price shocks, but the converse is not observed.