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Fuel-feed-livestock price linkages under structural changes

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  • Zhige Wu
  • Alfons Weersink
  • Alex Maynard

Abstract

The large-scale diversion of crops into mandates-driven biofuels since early 2000s, has raised concerns about impacts of biofuel policies on food prices. This study examines crude oil-corn-livestock dynamic linkages from January 1987 until December 2019 in Ontario, Canada. A significant structural break is identified in March 2011 as biofuel policy impacts become fully implemented and splits the three-decade period into pre- and post-break sub-periods. A nonlinear autoregressive distributed lag (NARDL) approach is employed since it allows prices to be tied by asymmetric relationships both in the short- and long-run. The NARDL model bounds test results indicate that crude oil and corn prices have a long-run connection with livestock prices in both sub-periods. In the post-break period, corn price has an asymmetric effect on cattle price in the long-run, with negative shocks in the corn price leading to a greater intensity on the cattle price than positive shocks. The presence of short-run asymmetry is evident in the impacts of crude oil price on both cattle and hog prices. However, the above asymmetric effect is insignificant in the pre-break period.

Suggested Citation

  • Zhige Wu & Alfons Weersink & Alex Maynard, 2022. "Fuel-feed-livestock price linkages under structural changes," Applied Economics, Taylor & Francis Journals, vol. 54(2), pages 206-223, January.
    • Handle: RePEc:taf:applec:v:54:y:2022:i:2:p:206-223
    DOI: 10.1080/00036846.2021.1965082
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