IDEAS home Printed from https://ideas.repec.org/a/gam/jeners/v9y2016i6p464-d72185.html
   My bibliography  Save this article

Interdependencies between Biofuel, Fuel and Food Prices: The Case of the Brazilian Ethanol Market

Author

Listed:
  • Deborah Bentivoglio

    (Department of Agricultural, Food and Environmental Sciences (D3A), Università Politecnica delle Marche, Via Brecce Bianche, Ancona 60131, Italy)

  • Adele Finco

    (Department of Agricultural, Food and Environmental Sciences (D3A), Università Politecnica delle Marche, Via Brecce Bianche, Ancona 60131, Italy)

  • Mirian Rumenos Piedade Bacchi

    (Departamento de Economia Administração e Sociologia, Escola Superior de Agricultura Luiz de Queiroz, Universidade de São Paulo, Av. Pádua Dias 11, Piracicaba, São Paulo 13400-970, Brazil)

Abstract

Brazil is currently the world’s largest sugar producer and exporter, as well as the world’s largest producer and consumer of sugarcane ethanol as a transportation fuel. The growth of this market originates from a combination of government policies and technological change, in both the sugarcane ethanol processing sector and the manufacture of flex-fuel vehicles. In recent years however, ethanol production has been questioned due to its possible impact on food prices. The present paper aims to explore the impact of Brazilian ethanol prices on sugar and gasoline prices. The relationships between a times series of these prices are investigated using a Vector Error Correction Model (VECM), supported by Granger Causality tests. In addition, Impulse Response Functions (IRFs) and Forecast Error Variance Decompositions (FEVD) are computed in order to investigate the dynamic interrelationships within these series. Our results suggest that ethanol prices are affected by both food and fuel prices, but that there is no strong evidence that changes in ethanol prices have an impact on food prices.

Suggested Citation

  • Deborah Bentivoglio & Adele Finco & Mirian Rumenos Piedade Bacchi, 2016. "Interdependencies between Biofuel, Fuel and Food Prices: The Case of the Brazilian Ethanol Market," Energies, MDPI, vol. 9(6), pages 1-16, June.
    • Handle: RePEc:gam:jeners:v:9:y:2016:i:6:p:464-:d:72185
    as

    Download full text from publisher

    File URL: https://www.mdpi.com/1996-1073/9/6/464/pdf
    Download Restriction: no
    File URL: https://www.mdpi.com/1996-1073/9/6/464/
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Saghaian, Sayed H., 2010. "The Impact of the Oil Sector on Commodity Prices: Correlation or Causation?," Journal of Agricultural and Applied Economics, Cambridge University Press, vol. 42(3), pages 477-485, August.
    2. David Zilberman & Gal Hochman & Deepak Rajagopal & Steve Sexton & Govinda Timilsina, 2013. "The Impact of Biofuels on Commodity Food Prices: Assessment of Findings," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 95(2), pages 275-281.
    3. Gardebroek, Cornelis & Hernandez, Manuel A., 2013. "Do energy prices stimulate food price volatility? Examining volatility transmission between US oil, ethanol and corn markets," Energy Economics, Elsevier, vol. 40(C), pages 119-129.
    4. Teresa Serra & David Zilberman & José Gil, 2011. "Price volatility in ethanol markets," European Review of Agricultural Economics, Oxford University Press and the European Agricultural and Applied Economics Publications Foundation, vol. 38(2), pages 259-280, June.
    5. Christopher L. Gilbert, 2010. "How to Understand High Food Prices," Journal of Agricultural Economics, Wiley Blackwell, vol. 61(2), pages 398-425, June.
    6. Xiaodong Du and Lihong Lu McPhail, 2012. "Inside the Black Box: the Price Linkage and Transmission between Energy and Agricultural Markets," The Energy Journal, International Association for Energy Economics, vol. 0(Number 2).
    7. Wixson, Sarah E. & Katchova, Ani L., 2012. "Price Asymmetric Relationships in Commodity and Energy Markets," 123rd Seminar, February 23-24, 2012, Dublin, Ireland 122553, European Association of Agricultural Economists.
    8. Stefan Busse & Bernhard Brümmer & Rico Ihle, 2012. "Price formation in the German biodiesel supply chain: a Markov-switching vector error-correction modeling approach," Agricultural Economics, International Association of Agricultural Economists, vol. 43(5), pages 545-560, September.
    9. Silva Lora, Electo E. & Escobar Palacio, José C. & Rocha, Mateus H. & Grillo Renó, Maria L. & Venturini, Osvaldo J. & Almazán del Olmo, Oscar, 2011. "Issues to consider, existing tools and constraints in biofuels sustainability assessments," Energy, Elsevier, vol. 36(4), pages 2097-2110.
    10. Ferreira-Filho, Joaquim Bento de Souza & Horridge, Mark, 2011. "Ethanol Expansion and the Indirect Land Use Change in Brazil," Conference papers 332079, Purdue University, Center for Global Trade Analysis, Global Trade Analysis Project.
    11. Testa, Riccardo & Foderà, Mario & Di Trapani, Anna Maria & Tudisca, Salvatore & Sgroi, Filippo, 2016. "Giant reed as energy crop for Southern Italy: An economic feasibility study," Renewable and Sustainable Energy Reviews, Elsevier, vol. 58(C), pages 558-564.
    12. Chinnici, Gaetano & D’Amico, Mario & Rizzo, Marcella & Pecorino, Biagio, 2015. "Analysis of biomass availability for energy use in Sicily," Renewable and Sustainable Energy Reviews, Elsevier, vol. 52(C), pages 1025-1030.
    13. Myers, Robert J., 1992. "Time Series Econometrics and Commodity Price Analysis," 1992 Conference (36th), February 10-13, 1992, Canberra, Australia 146550, Australian Agricultural and Resource Economics Society.
    14. Haixia, Wu & Shiping, Li, 2013. "Volatility spillovers in China’s crude oil, corn and fuel ethanol markets," Energy Policy, Elsevier, vol. 62(C), pages 878-886.
    15. Ladislav Kristoufek & Karel Janda & David Zilberman, 2012. "Mutual Responsiveness of Biofuels, Fuels and Food Prices," CAMA Working Papers 2012-38, Centre for Applied Macroeconomic Analysis, Crawford School of Public Policy, The Australian National University.
    16. Ciaian, Pavel & Kancs, d'Artis, 2011. "Interdependencies in the energy-bioenergy-food price systems: A cointegration analysis," Resource and Energy Economics, Elsevier, vol. 33(1), pages 326-348, January.
    17. Perimenis, Anastasios & Walimwipi, Hartley & Zinoviev, Sergey & Müller-Langer, Franziska & Miertus, Stanislav, 2011. "Development of a decision support tool for the assessment of biofuels," Energy Policy, Elsevier, vol. 39(3), pages 1782-1793, March.
    18. Marilyne Huchet-Bourdon, 2011. "Agricultural Commodity Price Volatility: An Overview," OECD Food, Agriculture and Fisheries Papers 52, OECD Publishing.
    19. Granger, C. W. J., 1988. "Some recent development in a concept of causality," Journal of Econometrics, Elsevier, vol. 39(1-2), pages 199-211.
    20. Havranek, Tomas & Irsova, Zuzana & Janda, Karel, 2012. "Demand for gasoline is more price-inelastic than commonly thought," Energy Economics, Elsevier, vol. 34(1), pages 201-207.
    21. Philip Abbott & Adeline Borot de Battisti, 2011. "Recent Global Food Price Shocks: Causes, Consequences and Lessons for African Governments and Donors-super- †," Journal of African Economies, Centre for the Study of African Economies, vol. 20(suppl_1), pages -62, May.
    22. Ladislav Kristoufek & Karel Janda & David Zilberman, 2013. "Non-linear Price Transmission between Biofuels, Fuels and Food Commodities," CERGE-EI Working Papers wp481, The Center for Economic Research and Graduate Education - Economics Institute, Prague.
    23. Brons, Martijn & Nijkamp, Peter & Pels, Eric & Rietveld, Piet, 2008. "A meta-analysis of the price elasticity of gasoline demand. A SUR approach," Energy Economics, Elsevier, vol. 30(5), pages 2105-2122, September.
    24. Orawan Ratanapakorn & Subhash Sharma, 2007. "Dynamic analysis between the US stock returns and the macroeconomic variables," Applied Financial Economics, Taylor & Francis Journals, vol. 17(5), pages 369-377.
    25. Balcombe, Kelvin, 2009. "The Nature and Determinants of Volatility in Agricultural Prices," MPRA Paper 24819, University Library of Munich, Germany.
    26. Peri, Massimo & Baldi, Lucia, 2010. "Vegetable oil market and biofuel policy: An asymmetric cointegration approach," Energy Economics, Elsevier, vol. 32(3), pages 687-693, May.
    27. Qiu, Cheng & Colson, Gregory & Escalante, Cesar & Wetzstein, Michael, 2012. "Considering macroeconomic indicators in the food before fuel nexus," Energy Economics, Elsevier, vol. 34(6), pages 2021-2028.
    28. Martines-Filho, Joao Gomes & Burnquist, Heloisa Lee & Vian, Carlos Eduardo de Freitas, 2006. "Bioenergy and the Rise of Sugarcane-Based Ethanol in Brazil," Choices: The Magazine of Food, Farm, and Resource Issues, Agricultural and Applied Economics Association, vol. 21(2), pages 1-6.
    29. Vacha, Lukas & Janda, Karel & Kristoufek, Ladislav & Zilberman, David, 2013. "Time–frequency dynamics of biofuel–fuel–food system," Energy Economics, Elsevier, vol. 40(C), pages 233-241.
    30. Crago, Christine L. & Khanna, Madhu & Barton, Jason & Giuliani, Eduardo & Amaral, Weber, 2010. "Competitiveness of Brazilian sugarcane ethanol compared to US corn ethanol," Energy Policy, Elsevier, vol. 38(11), pages 7404-7415, November.
    31. Brian D. Wright, 2011. "The Economics of Grain Price Volatility," Applied Economic Perspectives and Policy, Agricultural and Applied Economics Association, vol. 33(1), pages 32-58.
    32. de Freitas, Luciano Charlita & Kaneko, Shinji, 2012. "Is there a causal relation between ethanol innovation and the market characteristics of fuels in Brazil?," Ecological Economics, Elsevier, vol. 74(C), pages 161-168.
    33. Pfaff, Bernhard, 2008. "VAR, SVAR and SVEC Models: Implementation Within R Package vars," Journal of Statistical Software, Foundation for Open Access Statistics, vol. 27(i04).
    34. Hassouneh, Islam & Serra, Teresa & Goodwin, Barry K. & Gil, José M., 2012. "Non-parametric and parametric modeling of biodiesel, sunflower oil, and crude oil price relationships," Energy Economics, Elsevier, vol. 34(5), pages 1507-1513.
    35. Kafle, Kashi R. & Pullabhotla, Hemant K, 2014. "Food for the Stomach or Fuel for the Tank: What do Prices Tell Us?," 2014 Annual Meeting, July 27-29, 2014, Minneapolis, Minnesota 170273, Agricultural and Applied Economics Association.
    36. Goldemberg, José & Coelho, Suani Teixeira & Guardabassi, Patricia, 2008. "The sustainability of ethanol production from sugarcane," Energy Policy, Elsevier, vol. 36(6), pages 2086-2097, June.
    37. Granger, C. W. J., 1980. "Testing for causality : A personal viewpoint," Journal of Economic Dynamics and Control, Elsevier, vol. 2(1), pages 329-352, May.
    38. Zhang, Zibin & Lohr, Luanne & Escalante, Cesar & Wetzstein, Michael, 2010. "Food versus fuel: What do prices tell us?," Energy Policy, Elsevier, vol. 38(1), pages 445-451, January.
    39. Johansen, Soren, 1988. "Statistical analysis of cointegration vectors," Journal of Economic Dynamics and Control, Elsevier, vol. 12(2-3), pages 231-254.
    40. Aynur Pala, 2013. "Structural Breaks, Cointegration, and Causality by VECM Analysis of Crude Oil and Food Price," International Journal of Energy Economics and Policy, Econjournals, vol. 3(3), pages 238-246.
    41. Monica Padella & Adele Finco & Wallace E. Tyner, 2012. "Impacts of Biofuels Policies in the EU," Economics of Energy & Environmental Policy, International Association for Energy Economics, vol. 0(Number 3).
    42. Kelvin Balcombe & George Rapsomanikis, 2008. "Bayesian Estimation and Selection of Nonlinear Vector Error Correction Models: The Case of the Sugar-Ethanol-Oil Nexus in Brazil," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 90(3), pages 658-668.
    43. Tenkorang, Frank & Dority, Bree L. & Bridges, Deborah & Lam, Eddery, 2015. "Relationship between ethanol and gasoline: AIDS approach," Energy Economics, Elsevier, vol. 50(C), pages 63-69.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Antonina Kalinichenko & Valerii Havrysh & Igor Atamanyuk, 2019. "The Acceptable Alternative Vehicle Fuel Price," Energies, MDPI, vol. 12(20), pages 1-20, October.
    2. Capitani, Daniel Henrique Dario & Tonin, Julyerme M. & Cruz, Jose Cesar, 2017. "Integration and hedging efficiency between the Brazilian and the U.S. ethanol markets," 2017 Annual Meeting, July 30-August 1, Chicago, Illinois 258520, Agricultural and Applied Economics Association.
    3. Nicoletta Gronchi & Lorenzo Favaro & Lorenzo Cagnin & Silvia Brojanigo & Valentino Pizzocchero & Marina Basaglia & Sergio Casella, 2019. "Novel Yeast Strains for the Efficient Saccharification and Fermentation of Starchy By-Products to Bioethanol," Energies, MDPI, vol. 12(4), pages 1-13, February.
    4. Rodica Niculescu & Adrian Clenci & Victor Iorga-Siman, 2019. "Review on the Use of Diesel–Biodiesel–Alcohol Blends in Compression Ignition Engines," Energies, MDPI, vol. 12(7), pages 1-41, March.
    5. Karel Janda & Ladislav Krištoufek, 2019. "The Relationship Between Fuel and Food Prices: Methods and Outcomes," Annual Review of Resource Economics, Annual Reviews, vol. 11(1), pages 195-216, October.
    6. Derick D. Quintino & Sergio A. David & Carlos E. de F. Vian, 2017. "Analysis of the Relationship between Ethanol Spot and Futures Prices in Brazil," IJFS, MDPI, vol. 5(2), pages 1-10, April.
    7. Giuseppe Di Vita & Manuela Pilato & Biagio Pecorino & Filippo Brun & Mario D’Amico, 2017. "A Review of the Role of Vegetal Ecosystems in CO 2 Capture," Sustainability, MDPI, vol. 9(10), pages 1-10, October.
    8. Kocak, Emrah & Bilgili, Faik & Bulut, Umit & Kuskaya, Sevda, 2022. "Is ethanol production responsible for the increase in corn prices?," Renewable Energy, Elsevier, vol. 199(C), pages 689-696.
    9. Moncada, J.A. & Verstegen, J.A. & Posada, J.A. & Junginger, M. & Lukszo, Z. & Faaij, A. & Weijnen, M., 2018. "Exploring policy options to spur the expansion of ethanol production and consumption in Brazil: An agent-based modeling approach," Energy Policy, Elsevier, vol. 123(C), pages 619-641.
    10. Albarracín E., Eva Susana & Gamboa, Juan C. Rodríguez & Marques, Elaine C.M. & Stosic, Tatijana, 2019. "Complexity analysis of Brazilian agriculture and energy market," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 523(C), pages 933-941.
    11. Tan Ngoc Vu & Duc Hong Vo & Chi Minh Ho & Loan Thi-Hong Van, 2019. "Modeling the Impact of Agricultural Shocks on Oil Price in the US: A New Approach," JRFM, MDPI, vol. 12(3), pages 1-27, September.
    12. Sonja Simon & Tobias Naegler & Hans Christian Gils, 2018. "Transformation towards a Renewable Energy System in Brazil and Mexico—Technological and Structural Options for Latin America," Energies, MDPI, vol. 11(4), pages 1-26, April.
    13. Karel Janda & Ladislav Kristoufek, 2019. "The relationship between fuel and food prices: Methods, outcomes, and lessons for commodity price risk management," CAMA Working Papers 2019-20, Centre for Applied Macroeconomic Analysis, Crawford School of Public Policy, The Australian National University.
    14. Sergio Adriani David & Claudio M. C. Inácio & José A. Tenreiro Machado, 2019. "Ethanol Prices and Agricultural Commodities: An Investigation of Their Relationship," Mathematics, MDPI, vol. 7(9), pages 1-25, August.
    15. Bilgili, Faik & Koçak, Emrah & Kuşkaya, Sevda & Bulut, Ümit, 2020. "Estimation of the co-movements between biofuel production and food prices: A wavelet-based analysis," Energy, Elsevier, vol. 213(C).
    16. Machado Neto, Pedro Augusto, 2021. "Why Brazil imports so much corn-based ethanol: The role of Brazilian and American ethanol blending mandates," Renewable and Sustainable Energy Reviews, Elsevier, vol. 152(C).
    17. Bilgili, Faik & Kocak, Emrah & Kuskaya, Sevda & Bulut, Umit, 2022. "Co-movements and causalities between ethanol production and corn prices in the USA: New evidence from wavelet transform analysis," Energy, Elsevier, vol. 259(C).
    18. Capitani, Daniel H D & Gaio, Luiz Eduardo & Mattos, Fabio L. & Franco Da Silveira, Rodrigo Lanna & Cruz, Jose Cesar, 2024. "Corn ethanol expansion in Brazil: Are volatility interconnectedness changing?," 2024 Annual Meeting, July 28-30, New Orleans, LA 343612, Agricultural and Applied Economics Association.
    19. Janda, Karel & Kravec, Peter, 2022. "VECM Modelling of the Price Dynamics for Fuels, Agricultural Commodities and Biofuels," EconStor Preprints 259404, ZBW - Leibniz Information Centre for Economics.
    20. Derick David Quintino & Heloisa Lee Burnquist & Paulo Jorge Silveira Ferreira, 2021. "Carbon Emissions and Brazilian Ethanol Prices: Are They Correlated? An Econophysics Study," Sustainability, MDPI, vol. 13(22), pages 1-18, November.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Bentivoglio, Deborah & Finco, Adele & Bacchi, Mirian, 2015. "Examining Price Transmission between Fuels and Food Prices: the Brazilian Sugar-Ethanol Market," 2015 Conference, August 9-14, 2015, Milan, Italy 211327, International Association of Agricultural Economists.
    2. Serra, Teresa & Zilberman, David, 2013. "Biofuel-related price transmission literature: A review," Energy Economics, Elsevier, vol. 37(C), pages 141-151.
    3. Filip, Ondrej & Janda, Karel & Kristoufek, Ladislav & Zilberman, David, 2019. "Food versus fuel: An updated and expanded evidence," Energy Economics, Elsevier, vol. 82(C), pages 152-166.
    4. Karel Janda & Ladislav Kristoufek, 2019. "The relationship between fuel and food prices: Methods, outcomes, and lessons for commodity price risk management," CAMA Working Papers 2019-20, Centre for Applied Macroeconomic Analysis, Crawford School of Public Policy, The Australian National University.
    5. Bastianin, Andrea & Galeotti, Marzio & Manera, Matteo, 2014. "Causality and predictability in distribution: The ethanol–food price relation revisited," Energy Economics, Elsevier, vol. 42(C), pages 152-160.
    6. Yoon, Seong-Min, 2022. "On the interdependence between biofuel, fossil fuel and agricultural food prices: Evidence from quantile tests," Renewable Energy, Elsevier, vol. 199(C), pages 536-545.
    7. Karel Janda & Ladislav Krištoufek, 2019. "The Relationship Between Fuel and Food Prices: Methods and Outcomes," Annual Review of Resource Economics, Annual Reviews, vol. 11(1), pages 195-216, October.
    8. Mohcine Bakhat & Klaas WŸrzburg, 2013. "Price Relationships of Crude Oil and Food Commodities," Working Papers fa06-2013, Economics for Energy.
    9. Papież, Monika, 2014. "A dynamic analysis of causality between prices of corn, crude oil and ethanol," MPRA Paper 56540, University Library of Munich, Germany.
    10. Sergio Adriani David & Claudio M. C. Inácio & José A. Tenreiro Machado, 2019. "Ethanol Prices and Agricultural Commodities: An Investigation of Their Relationship," Mathematics, MDPI, vol. 7(9), pages 1-25, August.
    11. Wei Su, Chi & Wang, Xiao-Qing & Tao, Ran & Oana-Ramona, Lobonţ, 2019. "Do oil prices drive agricultural commodity prices? Further evidence in a global bio-energy context," Energy, Elsevier, vol. 172(C), pages 691-701.
    12. Ladislav Kristoufek & Karel Janda & David Zilberman, 2015. "Co-movements of Ethanol Related Prices: Evidence from Brazil and the USA," CAMA Working Papers 2015-11, Centre for Applied Macroeconomic Analysis, Crawford School of Public Policy, The Australian National University.
    13. Cheng, Sheng & Cao, Yan, 2019. "On the relation between global food and crude oil prices: An empirical investigation in a nonlinear framework," Energy Economics, Elsevier, vol. 81(C), pages 422-432.
    14. M. Thenmozhi & Shipra Maurya, 2020. "Crude Oil Volatility Transmission Across Food Commodity Markets: A Multivariate BEKK-GARCH Approach," Journal of Emerging Market Finance, Institute for Financial Management and Research, vol. 20(2), pages 131-164, August.
    15. Abdelradi, Fadi & Serra, Teresa, 2015. "Food–energy nexus in Europe: Price volatility approach," Energy Economics, Elsevier, vol. 48(C), pages 157-167.
    16. Hanif, Waqas & Areola Hernandez, Jose & Shahzad, Syed Jawad Hussain & Yoon, Seong-Min, 2021. "Tail dependence risk and spillovers between oil and food prices," The Quarterly Review of Economics and Finance, Elsevier, vol. 80(C), pages 195-209.
    17. Tiwari, Aviral Kumar & Nasreen, Samia & Shahbaz, Muhammad & Hammoudeh, Shawkat, 2020. "Time-frequency causality and connectedness between international prices of energy, food, industry, agriculture and metals," Energy Economics, Elsevier, vol. 85(C).
    18. Mugera, Harriet & Gilbert, Christopher, 2015. "Structural Change in the Relationship Between Energy and Food Prices," 2015 Conference, August 9-14, 2015, Milan, Italy 212505, International Association of Agricultural Economists.
    19. Bastianin, Andrea & Galeotti, Marzio & Manera, Matteo, 2016. "Ethanol and field crops: Is there a price connection?," Food Policy, Elsevier, vol. 63(C), pages 53-61.
    20. Saghaian, Sayed H. & Nemati, Mehdi & Walters, Cory G. & Chen, Bo, 2017. "Asymmetric Price Volatility Interaction between U.S. Food and Energy Markets," 2017 Annual Meeting, July 30-August 1, Chicago, Illinois 258240, Agricultural and Applied Economics Association.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:gam:jeners:v:9:y:2016:i:6:p:464-:d:72185. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: MDPI Indexing Manager (email available below). General contact details of provider: https://www.mdpi.com .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.