Effects of energy prices on the soft commodities market
2010
Ghaith, Z.
Everything that happens in both the living and the nonliving world is due to food and energy. Food and energy drive the economy, and all living creatures require them. Recently a new debate has started regarding food and energy issues because food has become an alternative source of energy and energy is becoming the main input of agriculture. This study attempts to investigate the possible long-term relationship between the prices of crude oil and food commodities represented by maize, wheat, sorghum, soybean, barley, linseed oil, soybean oil, and palm oil. Time series econometric techniques (Unit root test, Co-integration, and Granger causality) are applied. The study utilizes monthly data over the period from 1980 to 2009. The results of this study reveal that there is strong evidence of a long-term relationship between crude oil and the food commodity prices. A traditional Granger Causality is used to check whether unidirectional or bidirectional causality exists between the two product prices. The outcome suggests that there is unidirectional causality between the prices of crude oil and some of the food commodities under examination.
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