Environmental and Resource Economics Review (자원ㆍ환경경제연구)

Korean Resource Economics Association (한국자원경제학회)
권호 표지
DOI QR코드

DOI QR Code

Causal Relationship among Bioethanol Production, Corn Price, and Beef Price in the U.S.

  • Seok, Jun Ho (National Institute of Agricultural Sciences, Rural Development Administration) ;
  • Kim, GwanSeon (Department of Agricultural Economics, University of Kentucky) ;
  • Kim, Soo-Eun (Department of Industry and Economy, JeonBuk Institute)
  • Received : 2018.04.17
  • Accepted : 2018.07.19
  • Published : 2018.09.30
Download PDF
⟨ Previous Next ⟩

Abstract

This paper investigates the impact of ethanol mandate on the price relationship between corn and beef using the monthly time-series data from January 2003 through December 2013. In addition, we examine the non-linearity in ethanol, corn, and beef markets. Based on the threshold cointegration test, we find the symmetric relationship in pairs with ethanol production-corn price and ethanol production-beef price whereas there is the asymmetric relationship between prices of corn and beef. Employing the threshold vector error correction and vector error correction models, we also find that the corn price in the U.S is caused by both ethanol production and beef price in a long-run when the beef price is relatively high. On the other hand, the corn price does not cause both ethanol production and beef price in the long run. Findings from this study imply that demanders for corn such as ethanol and beef producers have price leadership on corn producers.

Keywords

References

  1. Al-Riffai, Perrihan, Betina Dimaranan, and David Laborde. 2010. Global Trade and Environmental Impact Study of the EU Biofuels Mandate. Vol. 125. IFPRI Washington, DC. http://environmentportal.in/files/biofuelsreportec.pdf.
  2. Anderson, John D., and Keith H. Coble. 2010. "Impact of Renewable Fuels Standard Ethanol Mandates on the Corn Market." Agribusiness, Vol. 26, No. 1, pp. 49-63. https://doi.org/10.1002/agr.20202
  3. Arzac, Enrique R., and Maurice Wilkinson. 1979. "A Quarterly Econometric Model of United States Livestock and Feed Grain Markets and Some of Its Policy Implications." American Journal of Agricultural Economics, Vol. 61, No. 2, pp. 297-308. https://doi.org/10.2307/1239734.
  4. Awokuse, Titus O., and Xiaohong Wang. 2009. "Threshold Effects and Asymmetric Price Adjustments in US Dairy Markets." Canadian Journal of Agricultural Economics/Revue Canadienne d'agroeconomie, Vol. 57, No. 2, pp. 269-286. https://doi.org/10.1111/j.1744-7976.2009.01151.x
  5. Baier, Scott L., Mark Clements, Charles W. Griffiths, and Jane E. Ihrig. 2009. "Biofuels Impact on Crop and Food Prices: Using an Interactive Spreadsheet." SSRN. https://papers.ssrn.com/soL3/papers.cfm?abstract_id=1372839.
  6. Bakucs, Zoltan, Jan Falkowski, and Imre Ferto. 2014. "Does Market Structure Influence Price Transmission in the Agro-Food Sector? A Meta-Analysis Perspective." Journal of Agricultural Economics, Vol. 65, No. 1, pp. 1-25. https://doi.org/10.1111/1477-9552.12042
  7. Bento, Antonio M., and Richard Klotz. 2014. "Climate Policy Decisions Require Policy-Based Lifecycle Analysis." Environmental Science & Technology, Vol. 48, No. 10, pp. 5379-5387. https://doi.org/10.1021/es405164g
  8. Carter, Colin A., Gordon C. Rausser, and Aaron Smith. 2016. "Commodity Storage and the Market Effects of Biofuel Policies." American Journal of Agricultural Economics. https://doi.org/10.1093/ajae/aaw010.
  9. Cha, Kyung Soo, and Jeong Hwan Bae. 2011. "Dynamic Impacts of High Oil Prices on the Bioethanol and Feedstock Markets." Energy Policy, Special Section on Offshore wind power planning, economics and environment, Vol. 39, No. 2, pp. 753-760. https://doi.org/10.1016/j.enpol.2010.10.049.
  10. Chang, Ting-Huan, and Hsin-Mei Su. 2010. "The Substitutive Effect of Biofuels on Fossil Fuels in the Lower and Higher Crude Oil Price Periods." Energy, Vol. 35, No. 7, pp. 2807-2813. https://doi.org/10.1016/j.energy.2010.03.006.
  11. Chen, Bo, and Sayed Saghaian. 2015. "The Relationship among Ethanol, Sugar and Oil Prices in Brazil: Cointegration Analysis with Structural Breaks." In Annual Meeting, January. http://ageconsearch.umn.edu/bitstream/196788/2/The%20Relationship%20among%20Ethanol,%20Sugar%20and%20Oil%20Prices%20in%20Brazil%20Cointegration%20Analysis%20with%20Structural%20Breaks.pdf.
  12. Chen, Bo, and Sayed Saghaian. 2016. "Market Integration and Price Transmission in the World Rice Export Markets." Journal of Agricultural and Resource Economics, Vol. 41, No. 3, pp. 444-457.
  13. Condon, Nicole, Heather Klemick, and Ann Wolverton. 2015. "Impacts of Ethanol Policy on Corn Prices: A Review and Meta-Analysis of Recent Evidence." Food Policy, Vol. 51, pp. 63-73. https://doi.org/10.1016/j.foodpol.2014.12.007
  14. DeJong, D., J. Nankervis, N. Savin, and C. Whiteman. 1988. "Integration versus Trend-Stationarity in Macroeconomic Time Series." University of Iowa. http://scholar.google.com/scholar?cluster=11996799751955673934&hl=en&oi=scholarr.
  15. Dickey, David A., and Wayne A. Fuller. 1979. "Distribution of the Estimators for Autoregressive Time Series With a Unit Root." Journal of the American Statistical Association, Vol. 74, No. 366, pp. 427-431. https://doi.org/10.2307/2286348.
  16. Drabik, Dusan, Pavel Ciaian, and Jan Pokrivcak. 2016. "The Effect of Ethanol Policies on the Vertical Price Transmission in Corn and Food Markets." Energy Economics, Vol. 55 (March) pp. 189-199. https://doi.org/10.1016/j.eneco.2016.02.010.
  17. Gehlhar, Mark J., Agapi Somwaru, and Ashley Winston. 2010. "Effects of Increased Biofuels on the US Economy in 2022." https://papers.ssrn.com/sol3/papers.cfm?abstract_id=1711353.
  18. Gohin, Alexandre, and David Treguer. 2010. "On the (De)Stabilization Effects of Biofuels: Relative Contributions of Policy Instruments and Market Forces." Journal of Agricultural and Resource Economics, Vol. 35, No. 1, pp. 72-86.
  19. Gorter, Harry de, and David R. Just. 2009. "The Economics of a Blend Mandate for Biofuels." American Journal of Agricultural Economics, Vol. 91, No. 3, pp. 738-750. https://doi.org/10.1111/j.1467-8276.2009.01275.x
  20. Granger, Clive WJ. 1988. "Some Recent Development in a Concept of Causality." Journal of Econometrics, Vol. 39, No. 1-2, pp. 199-211. https://doi.org/10.1016/0304-4076(88)90045-0
  21. Hansen, Bruce E., and Byeongseon Seo. 2002. "Testing for Two-Regime Threshold Cointegration in Vector Error-Correction Bodels." Journal of Econometrics, Vol. 110, No. 2, pp. 293-318. https://doi.org/10.1016/S0304-4076(02)00097-0
  22. Johansen, Soren. 1988. "Statistical Analysis of Cointegration Vectors." Journal of Economic Dynamics and Control, Vol. 12, No. 2, pp. 231-254. https://doi.org/10.1016/0165-1889(88)90041-3.
  23. Johansen, Soren, and Katarina Juselius. 1990. "Maximum Likelihood Estimation and Inference on Cointegration-with Applications to the Demand for Money." Oxford Bulletin of Economics and Statistics, Vol. 52, No. 2, pp. 169-210. https://doi.org/10.1111/j.1468-0084.1990.mp52002003.x
  24. Kim, GwanSeon, and Tyler Mark. 2017. "Impacts of Corn Price and Imported Beef Price on Domestic Beef Price in South Korea." Agricultural and Food Economics, Vol. 5, No. 1, p. 5. https://doi.org/10.1186/s40100-017-0074-0.
  25. Kwiatkowski, Denis, Peter C. B. Phillips, Peter Schmidt, and Yongcheol Shin. 1992. "Testing the Null Hypothesis of Stationarity against the Alternative of a Unit Root." Journal of Econometrics, Vol. 54, No. 1, pp. 159-178. https://doi.org/10.1016/0304-4076(92)90104-Y.
  26. Leibtag, Ephraim. 2008. "Corn Prices near Record High, But What about Food Costs?" Amber Waves, Vol. 6, No. 1, p. 10.
  27. McPhail, Lihong Lu. 2011. "Assessing the Impact of US Ethanol on Fossil Fuel Markets: A Structural VAR Approach." Energy Economics, Vol. 33, No. 6, pp. 1177-1185. https://doi.org/10.1016/j.eneco.2011.04.012.
  28. Oladosu, Gbadebo, Keith Kline, Paul Leiby, Rocio Uria-Martinez, Maggie Davis, Mark Downing, and Laurence Eaton. 2012. "Global Economic Effects of US Biofuel Policy and the Potential Contribution from Advanced Biofuels." Biofuels, Vol. 3, No. 6, pp. 703-723. https://doi.org/10.4155/bfs.12.60
  29. Roberts, Michael J., and Wolfram Schlenkera. 2013. "Identifying Supply and Demand Elasticities of Agricultural Commodities: Implications for the US Ethanol Mandate." The American Economic Review, Vol. 103, No. 6, pp. 2265-2295. https://doi.org/10.1257/aer.103.6.2265
  30. Saghaian, Sayed H. 2010. "The Impact of the Oil Sector on Commodity Prices: Correlation or Causation?" Journal of Agricultural and Applied Economics, Vol. 42, No. 3, pp. 477-485. https://doi.org/10.1017/S1074070800003667
  31. Sahm, Henriette, Jurn Sanders, Hiltrud Nieberg, Gesine Behrens, Heike Kuhnert, Renate Strohm, and Ulrich Hamm. 2013. "Reversion from Organic to Conventional Agriculture: A Review." Renewable Agriculture and Food Systems, Vol. 28, No. 3, pp. 263-275. https://doi.org/10.1017/S1742170512000117.
  32. Serra, Teresa, and David Zilberman. 2013. "Biofuel-Related Price Transmission Literature: A Review." Energy Economics, Vol. 37 (May), pp. 141-151. https://doi.org/10.1016/j.eneco.2013.02.014.
  33. Serra, Teresa, David Zilberman, Jose M. Gil, and Barry K. Goodwin. 2011. "Nonlinearities in the US Corn-Ethanol-Oil-Gasoline Price System." Agricultural Economics, Vol. 42, No. 1, pp. 35-45. https://doi.org/10.1111/j.1574-0862.2010.00464.x
  34. Sissine, F. 2010. "Renewable Fuel Standard Program (RFS2) Regulatory Impact Analysis." Technical Report EPA-420-R-10-006. Assessment and Standards Division, Office of Transportation and Air Quality. http://scholar.google.com/scholar?cluster=6819235910758890484&hl=en&oi=scholarr.
  35. Stigler, Matthieu. 2010. "Threshold Cointegration: Overview and Implementation in R." Working paper. http://cran.pau.edu.tr/web/packages/tsDyn/vignettes/ThCointOverview.pdf.
  36. Taheripour, Farzad, Thomas W. Hertel, and Wallace E. Tyner. 2011. "Implications of Biofuels Mandates for the Global Livestock Industry: A Computable General Equilibrium Analysis." Agricultural Economics, Vol. 42, No. 3, pp. 325-342. https://doi.org/10.1111/j.1574-0862.2010.00517.x
  37. U.S. Department of Energy. 2011. "Enerrgy Efficienty and Renewable Energy: Alternative and Advanced Fuels." http://www.afdc.energy.gov/afdc/fuels/index.html.
  38. Zilberman, David, Gal Hochman, Deepak Rajagopal, Steve Sexton, and Govinda Timilsina. 2013. "The Impact of Biofuels on Commodity Food Prices: Assessment of Findings." American Journal of Agricultural Economics, Vol. 95, No. 2, pp. 275-281. https://doi.org/10.1093/ajae/aas037.