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Energy and Agricultural Commodity Markets Interaction: An Analysis of Crude Oil, Natural Gas, Corn, Soybean, and Ethanol Prices

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  • Song-Zan Chiou-Wei, Sheng-Hung Chen, and Zhen Zhu

Abstract

This paper broadens the analysis of the interactions between energy and agricultural commodity markets by focusing on five major commodities: oil, natural gas, soybean, corn, and ethanol, and intends to provide more updated information regarding the degree of the connection among the markets. We estimate a DCC-MGARCH model to accommodate the dynamic and changing degree of interconnections among the five markets with respect to price levels and price volatilities. In doing so, we control for additional economic variables including oil and gas inventories, interest rate spread, exchange rate and economic activities. Our empirical evidence suggests that there are varying degrees of interconnections among the energy and agricultural commodities in the long term as well as the short term, but the interactions among the agricultural commodities and ethanol are generally higher than the interactions between oil and gas and agricultural markets. In addition, we reveal some weak evidence of commodity market speculation. The estimated conditional volatility correlations suggest that volatility spillovers among the markets were time dependent and dynamic.

Suggested Citation

  • Song-Zan Chiou-Wei, Sheng-Hung Chen, and Zhen Zhu, 2019. "Energy and Agricultural Commodity Markets Interaction: An Analysis of Crude Oil, Natural Gas, Corn, Soybean, and Ethanol Prices," The Energy Journal, International Association for Energy Economics, vol. 0(Number 2).
    • Handle: RePEc:aen:journl:ej40-2-chiou-wei
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    Cited by:

    1. Vatsa, Puneet & Baek, Jungho, 2023. "Asymmetric influence of oil demand and supply shocks on meat commodities," Energy Economics, Elsevier, vol. 128(C).
    2. Benlagha, Noureddine & Karim, Sitara & Naeem, Muhammad Abubakr & Lucey, Brian M. & Vigne, Samuel A., 2022. "Risk connectedness between energy and stock markets: Evidence from oil importing and exporting countries," Energy Economics, Elsevier, vol. 115(C).
    3. Zhou, Xiaoran & Enilov, Martin & Parhi, Mamata, 2024. "Does oil spin the commodity wheel? Quantile connectedness with a common factor error structure across energy and agricultural markets," Energy Economics, Elsevier, vol. 132(C).
    4. Miljkovic, Dragan & Vatsa, Puneet, 2023. "On the linkages between energy and agricultural commodity prices: A dynamic time warping analysis," International Review of Financial Analysis, Elsevier, vol. 90(C).
    5. Vo, Long Hai & Le, Thai-Ha, 2021. "Eatery, energy, environment and economic system, 1970–2017: Understanding volatility spillover patterns in a global sample," Energy Economics, Elsevier, vol. 100(C).
    6. Chen, Xiangyu & Tongurai, Jittima, 2022. "Spillovers and interdependency across base metals: Evidence from China's futures and spot markets," Resources Policy, Elsevier, vol. 75(C).
    7. Naeem, Muhammad Abubakr & Karim, Sitara & Hasan, Mudassar & Lucey, Brian M. & Kang, Sang Hoon, 2022. "Nexus between oil shocks and agriculture commodities: Evidence from time and frequency domain," Energy Economics, Elsevier, vol. 112(C).
    8. Ben Ameur, Hachmi & Ftiti, Zied & Louhichi, Waël, 2021. "Intraday spillover between commodity markets," Resources Policy, Elsevier, vol. 74(C).
    9. Linjie Wang & Jean‐Paul Chavas & Jian Li, 2024. "Dynamic linkages in agricultural and energy markets: A quantile impulse response approach," Agricultural Economics, International Association of Agricultural Economists, vol. 55(4), pages 639-676, July.
    10. Puneet Vatsa, 2022. "Do crop prices share common trends and common cycles?," Australian Journal of Agricultural and Resource Economics, Australian Agricultural and Resource Economics Society, vol. 66(2), pages 363-382, April.
    11. Bissoondoyal-Bheenick, Emawtee & Brooks, Robert & Do, Hung Xuan & Smyth, Russell, 2020. "Exploiting the heteroskedasticity in measurement error to improve volatility predictions in oil and biofuel feedstock markets," Energy Economics, Elsevier, vol. 86(C).
    12. Nonelelo Vuba & Thobekile Qabhobho, 2024. "The Risk Transfer among Exchange Rates, Energy Commodities, and Agricultural Commodity Prices in SADC Countries," International Journal of Energy Economics and Policy, Econjournals, vol. 14(2), pages 287-298, March.
    13. Cao, Yan & Cheng, Sheng, 2021. "Impact of COVID-19 outbreak on multi-scale asymmetric spillovers between food and oil prices," Resources Policy, Elsevier, vol. 74(C).
    14. Zhu, Bo & Lin, Renda & Deng, Yuanyue & Chen, Pingshe & Chevallier, Julien, 2021. "Intersectoral systemic risk spillovers between energy and agriculture under the financial and COVID-19 crises," Economic Modelling, Elsevier, vol. 105(C).
    15. Yip, Pick Schen & Brooks, Robert & Do, Hung Xuan & Nguyen, Duc Khuong, 2020. "Dynamic volatility spillover effects between oil and agricultural products," International Review of Financial Analysis, Elsevier, vol. 69(C).
    16. Anton Bekkerman & Thomas Gumbley & Gary W. Brester, 2021. "The Impacts of Biofuel Policies on Spatial and Vertical Price Relationships in the US Fertilizer Industry," Applied Economic Perspectives and Policy, John Wiley & Sons, vol. 43(2), pages 802-822, June.
    17. Taheripour, Farzad & Baumes, Harry & Tyner, Wally Taheripour, Farzad, 2019. "Impacts of the U.S. Renewable Fuel Standard on Commodity and Food Prices," Conference papers 333127, Purdue University, Center for Global Trade Analysis, Global Trade Analysis Project.
    18. Tiwari, Aviral Kumar & Abakah, Emmanuel Joel Aikins & Adewuyi, Adeolu O. & Lee, Chien-Chiang, 2022. "Quantile risk spillovers between energy and agricultural commodity markets: Evidence from pre and during COVID-19 outbreak," Energy Economics, Elsevier, vol. 113(C).
    19. Zhuo Chen & Bo Yan & Hanwen Kang, 2022. "Dynamic correlation between crude oil and agricultural futures markets," Review of Development Economics, Wiley Blackwell, vol. 26(3), pages 1798-1849, August.
    20. Taheripour, Farzad & Baumes, Harry S. & Tyner, Wallace E., 2020. "Economic impacts of the U.S. Renewable Fuel Standard: An ex-post evaluation," 2020 Annual Meeting, July 26-28, Kansas City, Missouri 304252, Agricultural and Applied Economics Association.
    21. Derick Quintino & Cristiane Ogino & Inzamam Ul Haq & Paulo Ferreira & Márcia Oliveira, 2023. "An Analysis of Dynamic Correlations among Oil, Natural Gas and Ethanol Markets: New Evidence from the Pre- and Post-COVID-19 Crisis," Energies, MDPI, vol. 16(5), pages 1-14, February.

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    • F0 - International Economics - - General

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