The global crude oil market and biofuel agricultural commodity prices

In this paper we use quarterly data, over the period from 1975:2 to 2016:1, and a joint structural VAR model of the global crude oil market and the U.S. corn market, to disentangle demand and supply shocks in the global crude oil market and the U.S. corn market and investigate their effects on corn prices in the United States. We identify the model by assuming that innovations to the real price of crude oil are predetermined with respect to the corn market in the United States and show that close to 36% of the variation in the real price of corn can be attributed to structural supply and demand shocks in the global crude oil market.