Advertisement

Sugar Tech

pp 1–7 | Cite as

Analysis of the Impact of Ethanol Production on Agricultural Product Prices in Brazil

  • Mansoor MaitahEmail author
  • Petr Procházka
  • Luboš Smutka
  • Kamil Maitah
  • Vladimír Honig
Research Article
  • 7 Downloads

Abstract

The last ten years have seen with intense price volatility in the commodities markets, especially within the energy sector. This fluctuation has had serious implications on markets all over the world. From an increased dependence on renewable energy sources, to potential climate change impacts on global markets, commodities markets continue to face unpredictable and explosive price instabilities. In 2015, Brazil experienced an unprecedented increase in the price of ethanol. It is believed that due to that increase, Brazil consequently witnessed a surge in food prices. The primary objective of this paper is to quantitatively analyze the relationship between ethanol production and agricultural commodity prices. Our analysis confirmed that the increase in ethanol production had an impact on the price of sugar, wheat, corn and barley. This conclusion was drawn after conducting a series of statistical tests, unit roots and price pairing cointegration estimates. The multitude of tests that were conducted demonstrates a clear link between food price fluctuations in Brazil and ethanol price spikes.

Keywords

Ethanol Brazil Energy Agricultural products Econometrics 

Notes

Supplementary material

12355_2019_709_MOESM1_ESM.docx (21 kb)
Supplementary material 1 (DOCX 20 kb)

References

  1. Abbot, P., C. Hurt, and W. Tyner. 2008. What’s driving food prices. Farm Foundation. Issue Report (75). https://www1.eere.energy.gov/bioenergy/pdfs/farm_foundation_whats_driving_food_prices.pdf. Accessed 09 Oct 2018.
  2. Anonymous. 2017. Ethanol. A Project of UNICA and ApexBrasil. http://sugarcane.org/sugarcane-products/ethanol. Accessed 17 Sep 2018.
  3. Baier, S., M. Clements, C. Griffiths, and J. Ihrig. 2009. Biofuel impact on crop and food prices: Using an interactive spreadsheet. International Finance Discussion Papers. https://www.federalreserve.gov/pubs/ifdp/2009/967/ifdp967.pdf. Accessed 12 Oct 2018.
  4. Barros, S. 2016. Brazil Biofuels annual report 2016. USDA Foreign Agricultural Services. https://www.fas.usda.gov/data/brazil-biofuels-annual-1. Accessed 16 Oct 2018.
  5. CBO. 2009. The impact of ethanol use on food prices and greenhouse-gas emission. Congressional Budget Office. Publication No.3155. https://www.cbo.gov/sites/default/files/cbofiles/ftpdocs/100xx/doc10057/04-08-ethanol.pdf. Accessed 26 September 2018.
  6. Chen, B., and S. Saghaian. 2015. The relationship among ethanol, sugar and oil prices in Brazil: Cointegration analysis with structural breaks. Southern Agricultural Economics Association’s 2015 Annual Meeting, Atlanta, Georgia, January 31-February 3, 205 (p. 1). https://ageconsearch.umn.edu/record/196788/files/The%20Relationship%20among%20Ethanol_%20Sugar%20and%20Oil%20Prices%20in%20Brazil%20Cointegration%20Analysis%20with%20Structural%20Breaks.pdf. Accessed 23 Oct 2018.
  7. Gerson, F.J. 2016. Sugar-Cane Fuel Wins in Brazil as Cheap Ethanol Beats Gasoline. Bloomberg 5. https://www.bloomberg.com/news/articles/2016-03-01/sugar-cane-fuel-wins-in-brazil-as-cheap-ethanol-beats-gasoline. Accessed 05 Oct 2018.
  8. Koizumi, T., and K. Yanagishima. 2005. Impact of the Brazilian ethanol program on the world ethanol and sugar market: An econometric simulation approach. Japanese Journal of Rural Economics 7(17): 761–777.Google Scholar
  9. Lipsky, J. 2008. Commodity Prices and Global Inflation. Council on Foreign Relations. International Monetary Fund. https://www.imf.org/en/News/Articles/2015/09/28/04/53/sp050808. Accessed 09 Sep 2018.
  10. McPhail, L.L., and B.A. Babcock. 2008. Short-run price and welfare impacts of federal ethanol policies. Working paper 08-WP468. Center for Agricultural and Rural Development, Iowa State University. Google Scholar
  11. Mohcine, B., and K. Wurzburg. 2013. Price Relationship of Crude Oil and Food Commodities. Economics for Energy https://www.researchgate.net/publication/259642939_Price_Relationships_of_Crude_Oil_and_Food_Commodities. Accessed 05 Oct 2018.
  12. O’Brien, D., and M. Woolverton. 2009. The relationship of Bioethanol, Gasoline and Oil Price. AgMRC Renewable Energy Newsletter. https://www.agmrc.org/renewable-energy/ethanol/the-relationship-of-ethanol-gasoline-and-oil-prices. Accessed 10 Oct 2018.
  13. Perron, P. 1990. Testing for a unit root in a time series with a changing mean. Journal of Business & Economic Statistics 8(2): 153–162.Google Scholar
  14. Perron, P., and T.J. Vogelsang. 1992. Nonstationarity and level shifts with an application to purchasing power parity. Journal of Business & Economic Statistics 10(3): 301–320.  https://doi.org/10.1080/07350015.1992.10509907.Google Scholar
  15. Rajčániová, M., and J. Pokrivcak. 2014. What is the real relationship between biofuels and agricultural commodities? https://www.pulib.sk/web/kniznica/elpub/dokument/Kotulic13/subor/08.pdf. Accessed 16 Oct 2018.
  16. Timilsina, G.R., and A. Shrestha. 2010. Biofuels: Markets, targets and impacts. policy research working paper WPS 5364. World Bank. http://hdl.handle.net/10986/3848. Accessed 11 Sep 2018.

Copyright information

© Society for Sugar Research & Promotion 2019

Authors and Affiliations

  1. 1.Department of Economics, Faculty of Economics and ManagementThe Czech University of Life Sciences PraguePraha 6 – SuchdolCzech Republic
  2. 2.Department of Trade and Finance, Faculty of Economics and ManagementThe Czech University of Life Sciences PraguePraha 6 – SuchdolCzech Republic
  3. 3.Department of Strategy, The Faculty of Business AdministrationThe University of EconomicsPraha 3Czech Republic

Personalised recommendations