Food, energy and environment: Is bioenergy the missing link?

We study price linkages between the food, energy and bioenergy markets. A vertically integrated multi-input, multi-output market model allows us to derive testable hypothesis, which we test by applying time-series analytical mechanisms to nine major traded food commodity prices along with one weighted average world crude oil price. The data consists of 939 weekly observations from January 1993 to December 2010. The empirical findings confirm the theoretical hypothesis that the prices for crude oil and food commodities are interdependent: a USD 1/barrel increase in oil prices and food commodity prices increase by between USD 0.09/tonne and USD 1.65/tonne.

► We study interdependencies between the food, energy and bioenergy prices. ► We find that the prices for fossil energy and food are interdependent. ► The crude oil price affects food prices primarily through the direct biofuel channel. ► An increase of 1 USD/barrel in oil price raises food prices between 0.09 and 1.65 USD/tonne.