Agricultural commodity prices and oil prices: mutual causation

McFarlane, I. (2016) Agricultural commodity prices and oil prices: mutual causation. Outlook on Agriculture, 45 (2). pp. 87-93. ISSN 2043-6866 doi: 10.1177/0030727016649809

Abstract/Summary

The world market price of many commodities including US corn (maize) peaked sharply in 2008. The US Energy Policy Act (2005) led to a rapid rise in demand for corn ethanol as a partial substitute for gasoline in the USA. In this paper we report analysis of weekly prices of corn, wheat, sugar and crude oil, together with monthly series derived from those and other weekly prices, for two consecutive seven year periods: 1999-2005 and 2006-2012. We find strong evidence of cointegration between prices in both series, but only weak evidence of causation. We conclude that the normal stimulus to production of agricultural commodities given by a price increase is sufficient to restore equilibrium in supply and demand within a period of about a year.

Item Type	Article
URI	https://reading-clone.eprints-hosting.org/id/eprint/65781
Identification Number/DOI	10.1177/0030727016649809
Refereed	Yes
Divisions	Life Sciences > School of Agriculture, Policy and Development > Department of Sustainable Land Management > Centre for Agri-environmental Research (CAER)
Publisher	Sage
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