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The Effect of Ethanol Production on Coarse Grains: New Price Relationships

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  • Martinez-Mejia, Pablo
  • Malaga, Jaime E.
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    Abstract

    For years, the U.S. price of grain sorghum has been settled as 95% of the price of corn. Nevertheless, the increasing demand for corn and grain sorghum in ethanol production might have changed that price relationship. In this study, we use cointegration and the vector autoregressive model with independent variable (VARX) to assess the relationship between the spot price of sorghum in several U.S. markets and corn’s futures market price during the period 1996–2008. The results indicate a price relationship between the price of sorghum in the Gulf ports, Kansas City, and Texas, and corn prices of 1.01, 0.99, and 0.99, respectively. These new relationships are noteworthy for producers and other stakeholders.

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    File URL: http://purl.umn.edu/90656
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    Bibliographic Info

    Article provided by Agricultural Economics Association of Georgia in its journal Journal of Agribusiness.

    Volume (Year): 27 (2009)
    Issue (Month): ()
    Pages:

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    Handle: RePEc:ags:jloagb:90656

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    Postal: 301 Conner Hall, University of Georgia, Athens, GA 30602-7509
    Web page: http://www.agecon.uga.edu/~jab/
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    Related research

    Keywords: causality test; cointegration; futures markets; VARX model; Agribusiness; Marketing;

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    1. Campiche, Jody L. & Bryant, Henry L. & Richardson, James W. & Outlaw, Joe L., 2007. "Examining the Evolving Correspondence Between Petroleum Prices and Agricultural Commodity Prices," 2007 Annual Meeting, July 29-August 1, 2007, Portland, Oregon TN 9881, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
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