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Nonlinearities in the US corn-ethanol-oil price system

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  • Serra, Teresa
  • Zilberman, David
  • Gil, Jose Maria
  • Goodwin, Barry K.

Abstract

We use a smooth transition vector error correction model to assess price relationships within the US ethanol industry. Daily ethanol, corn and oil futures prices observed from mid-2005 to mid-2007 are used in the analysis. Results indicate the existence of an equilibrium relationship between ethanol, corn and oil prices. However, only ethanol prices adjust, in a non-linear fashion, to deviations from this long-run parity. Generalized impulse response functions indicate that a shock to both oil and corn prices causes a change in ethanol prices of the same sign. Ethanol responses usually reach a peak after about 10 days of the initial shock and fade away within 35 days.

Suggested Citation

  • Serra, Teresa & Zilberman, David & Gil, Jose Maria & Goodwin, Barry K., 2008. "Nonlinearities in the US corn-ethanol-oil price system," 2008 Annual Meeting, July 27-29, 2008, Orlando, Florida 6512, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
    • Handle: RePEc:ags:aaea08:6512
    DOI: 10.22004/ag.econ.6512
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    Cited by:

    1. Mallory, Mindy L. & Irwin, Scott H. & Hayes, Dermot J., 2012. "How market efficiency and the theory of storage link corn and ethanol markets," Energy Economics, Elsevier, vol. 34(6), pages 2157-2166.
    2. Karel JANDA & Jakub KOURILEK & Sarah TRABELSI, 2017. "Price Co Movement between Biodiesel and Natural Gas," Journal of Advanced Research in Management, ASERS Publishing, vol. 8(1), pages 7-16.
    3. Busse, S. & Brümmer, B. & Ihle, R., 2011. "Investigating rapeseed price volatilities in the course of the food crisis," Proceedings “Schriften der Gesellschaft für Wirtschafts- und Sozialwissenschaften des Landbaues e.V.”, German Association of Agricultural Economists (GEWISOLA), vol. 46, March.
    4. Felippe Cauê Serigati & Paulo Furquim De Azevedo, 2016. "How To Indirectly Measure Market Transaction Costs," Anais do XLII Encontro Nacional de Economia [Proceedings of the 42nd Brazilian Economics Meeting] 192, ANPEC - Associação Nacional dos Centros de Pós-Graduação em Economia [Brazilian Association of Graduate Programs in Economics].
    5. Jan POKRIVČÁK & Miroslava RAJČANIOVÁ, 2011. "Crude oil price variability and its impact on ethanol prices," Agricultural Economics, Czech Academy of Agricultural Sciences, vol. 57(8), pages 394-403.
    6. Machado, Karina Scurupa & Seleme, Robson & Maceno, Marcell M.C. & Zattar, Izabel C., 2017. "Carbon footprint in the ethanol feedstocks cultivation – Agricultural CO2 emission assessment," Agricultural Systems, Elsevier, vol. 157(C), pages 140-145.
    7. Zhang, Xiaoyu & Liu, Yongfu, 2020. "The dynamic impact of international agricultural commodity price fluctuation on Chinese agricultural commodity prices," International Food and Agribusiness Management Review, International Food and Agribusiness Management Association, vol. 23(3), August.
    8. Janda, Karel & Kourilek, Jakub, 2016. "Description of Biofuels and Shale Gas Development," MPRA Paper 74885, University Library of Munich, Germany.
    9. Mallory, Mindy L. & Irwin, Scott H. & Hayes, Dermot J., 2012. "How Market Efficiency and the Theory of Storage Link Corn and Ethanol Markets Energy Economics," ISU General Staff Papers 201211010700001537, Iowa State University, Department of Economics.
    10. Ahmed, Osama, 2021. "Do future markets protect the spot markets in developing countries? The case of the Egyptian wheat market," EconStor Open Access Articles and Book Chapters, ZBW - Leibniz Information Centre for Economics, vol. 20(5), pages 65-83.

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