World economy and international economic relations

Time-varying relationship between Ukrainian corn and world crude oil prices

Economic Annals-XXI

Economic Annals-ХХI: Volume 184, Issue 7-8, Pages: 49-57

Citation information:
Hamulczuk, M., & Makarchuk, O. (2020). Time-varying relationship between Ukrainian corn and world crude oil prices. Economic Annals-XXI, 184(7-8), 49-57. doi: https://doi.org/10.21003/ea.V184-05

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Mariusz Hamulczuk
PhD (Economics),
Associate Professor,
Warsaw University of Life Sciences (SGGW)
166 Nowoursynowska Str., Warsaw, 02-787, Poland
mariusz_hamulczuk@sggw.edu.pl
ORCID ID: https://orcid.org/0000-0002-4956-8516

Oksana Makarchuk
PhD (Economics),
Associate Professor,
National University of Life and Environmental Sciences of Ukraine – NULES of Ukraine
11 Heroyiv Oborony Str., education building No. 10, room 605, Kyiv, 03041, Ukraine
makarchukoks@gmail.com
ORCID ID: https://orcid.org/0000-0002-5997-5879

Time-varying relationship between Ukrainian corn and world crude oil prices

Abstract. Corn belongs to the most important feed and industrial grains in the world being utilized for bioethanol production. Ukraine does not produce biofuels and does not pursue an active renewable energy policy. However, due to significant share of exports, corn prices in Ukraine can be shaped under the influence of biofuel policies pursued by developed countries, as well as under the influence of world energy markets. Therefore, the aim of the paper is to investigate the mechanisms linking Ukrainian export corn prices with Brent oil prices, as well as to quantitatively assess the nature of this relationship. We were especially interested in possible time-varying relationship between the prices. The price analysis was carried out on the basis of monthly data for the period 2001-2020 with the use of rolling correlation technique and rolling causality tests.

The results of this research indicate on time-varying co-movements of Ukrainian corn and Brent crude oil prices. The strongest positive correlations and significant bidirectional causality were observed in 2007-2011. However, in most of sub-periods there were no significant relationships between these prices. Among factors strengthening the price linkages are the low corn-oil price ratios, dynamic increase of corn utilized for ethanol production and depletion of the world corn stocks. The conducted analysis confirmed that changes in biofuel demand in other countries can affect Ukrainian corn market due to horizontal integration of grain markets worldwide. Biofuel policy reforms in the EU aiming at decreasing mandatory blending of conventional biofuels in favor of advanced biofuels can lead to decrease in demand for corn in Ukraine after 2021, leading, in turn, to further weakening of linkage between corn and crude oil prices.

Keywords: Corn; Crude Oil; Brent; Bioethanol; Biofuel; Price Transmission; Time-Varying; Causality; Energy Policy

JEL Classification: Q13; Q18; Q28

Acknowledgements and Funding: The authors received no direct funding for this research.

Contribution: The authors contributed equally to this work.

DOI: https://doi.org/10.21003/ea.V184-05

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Received 2.07.2020
Received in revised form 20.07.2020
Accepted 26.07.2020
Available online 10.09.2020

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