Premium
Crude Oil and Agricultural Futures: An Analysis of Correlation Dynamics
Author(s) -
Silvennoinen Annastiina,
Thorp Susan
Publication year - 2016
Publication title -
journal of futures markets
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.88
H-Index - 55
eISSN - 1096-9934
pISSN - 0270-7314
DOI - 10.1002/fut.21770
Subject(s) - futures contract , biofuel , economics , agriculture , crude oil , oil price , renewable energy , fossil fuel , negative correlation , agricultural economics , econometrics , financial economics , monetary economics , chemistry , geography , engineering , petroleum engineering , archaeology , medicine , electrical engineering , organic chemistry , waste management
Correlations between oil and agricultural commodities have varied over previous decades, impacted by renewable fuels policy and turbulent economic conditions. We estimate smooth transition conditional correlation models for 12 agricultural commodities and WTI crude oil. While a structural change in correlations occurred concurrently with the introduction of biofuel policy, oil and food price levels are also key influences. High correlation between biofuel feedstocks and oil is more likely to occur when food and oil price levels are high. Correlation with oil returns is strong for biofuel feedstocks, unlike with other agricultural futures, suggesting limited contagion from energy to food markets. © 2016 Wiley Periodicals, Inc. Jrl Fut Mark 36:522–544, 2016