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Abstract

The “food vs. fuel” debate has been difficult to resolve without letting the data speak. In this paper we investigate the short run interactions and the long-run equilibrium relationship between food and fuel prices. Results from cointegration analysis indicate a long-run equilibrium relationships between these prices. A closer examination of the price dynamics between ethanol and three food prices revealed that the corn-soybean linkage plays a key role in the fuel-food long-run relationship. Our results indicate that ethanol prices Granger cause corn prices, while no individual agricultural commodity appears to Granger cause ethanol prices. However, corn and soybean as a single group had a significant impact on the ethanol market.

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