Food for the Stomach or Fuel for the Tank: What do Prices Tell Us?
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The "food vs. fuel" debate may be difficult to resolve without letting the data ’speak’. We
investigate the short and long-run relationships between food and fuel prices. Our analysis
spans the period 1989-2013, covering the lead-up to the 2007-08 price spike, the sharp downward
movement in the aftermath, as well as the period thereafter. This provides a more complete
picture of the interaction between agriculture and fuel markets. Our results indicate the
existence of a long-run equilibrium relationship between the prices in these markets. A closer
examination of the dynamics between ethanol and corn, soybean, and sugar prices shows that
the corn-soybean linkage plays a key role in shaping the long-run relationship between food
and fuel prices. Although ethanol prices Granger cause corn prices, no individual agricultural
commodity Granger causes ethanol prices. However, corn and soybean as a single group has
an impact on the ethanol market