Food-Biofuels Interactions: The Case of the U.S. Biofuels Market
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Abstract
Corn refers to the main feedstock for U.S. biofuels production and together with soybean oil, as typical biofuel food commodity that can be converted into biodiesel, accounts for over 90 percent of biofuels production in the United States. The paper focuses on the nexus of agri-food and energy markets in U.S. and investigates the interrelationships between the biofuel prices and prices of soybean oil, corn and wheat. Co-integration analysis and vector error correction model are carried out in order to investigate the relationship between the price series. The results show that biofuels and food price levels are co-integrated in the long run. These links show that food prices increment with a rise in biofuels prices. Additionally, not only food prices are determined by biofuels prices, but also vice versa.