Skip to main content Accessibility help

The Relationship between Oil, Exchange Rates, and Commodity Prices

  • Ardian Harri (a1), Lanier Nalley (a2) and Darren Hudson (a3)


Exchange rates have long been thought to have an important impact on the export and import of goods and services, and, thus, exchange rates are expected to influence the price of those products that are traded. At the same time, energy impacts commodity production in some very important ways. The use of chemical and petroleum derived inputs has increased in agriculture over time; the prices of these critical inputs, then, would be expected to alter supply, and, therefore, the prices of commodities using these inputs. Also, agricultural commodities have been increasingly used to produce energy, thereby leading to an expectation of a linkage between energy and commodity markets. In this paper, we examine the price relationship through time of the primary agricultural commodities, exchange rates, and oil prices. Using overlapping time periods, we examine the cointegration relationship between prices to determine changes in the strength of the linkage between markets through time. In general, we find that commodity prices are linked to oil for corn, cotton, and soybeans, but not for wheat, and that exchange rates do play a role in the linkage of prices over time.



Hide All
Abbott, P., Hurt, C., and Tyner, W.What's Driving Food Prices?Farm Foundation Issue Report July 2008.
Akaike, H.Markovian Representation of Stochastic Processes and Its Application to the Analysis of Autoregressive Moving Average Processes.” Annals of the Institute of Statistical Mathematics 26(1974:363-87.
Akaike, H.Factor Analysis and AIC.” Psychometrika 52(1987:317-32.
Anderson, J.D., and Coble, K.H. “Impact of Renewable Fuels Standard Ethanol Mandates on the Corn Market.” Agribusiness: An International Journal (Forthcoming).
Bozdogan, H.Model Selection and Akaike's Information Criterion (AIC): The General Theory and Its Analytical Extensions.” Psychometrika 52(1987:34570.
Campiche, J., Bryant, H., Richardson, J., and Outlaw, J.Examining the Evolving Correspondence between Petroleum Prices and Agricultural Commodity Prices.” Paper presented at the American Agricultural Economics Association Annual Meeting, Portland, OR, July 29-August 1, 2007.
Dickey, D.A., and Fuller, W.A.Distribution of the Estimators for Autoregressive Time Series with a Unit Root.” Journal of the American Statistical Association 74(1979): 427–31.
Dickey, D.A., and Fuller, W.A.Likelihood Ratio Statistics for Autoregressive Processes.” Econometrica 49(1981): 1057–72.
Engle, R.F., and Granger, C.W.J.Cointegration and Error Correction: Representation, Estimation and Testing.” Econometrica 55(1987):251–76.
Federal Reserve Economic Data. Internet site: (Accessed October 2008).
Johansen, S.A Representation of Vector Auto-regressive Processes Integrated of Order 2.” Econometric Theory 8(1992): 188202.
Johansen, S., Likelihood-based Inference in Cointegrated Vector Autoregressive Models. Oxford: Oxford University Press, 1995:1120.
Johansen, S., and Juselius, K.Maximum Likelihood Estimation and Inference on Cointegration—With Application to the Demand for Money.” Oxford Bulletin of Economics and Statistics 52(1990): 169210.
Johansen, S., and Juselius, K.Testing Structural Hypotheses in a Multivariate Cointegration Analysis of the PPP and the UIP for UK. Journal of Econometrics 53(1992):211-44.
Hanson, K., Robinson, S., and Schluter, G.Sectoral Effects of a World Oil Price Shock: Economywide Linkages to the Agricultural Sector.” Journal of Agricultural and Resource Economics. 18,1(1993:96116.
Reed, A., Hanson, K., Elitzak, H., and Schluter, G. “Changing Consumer Food Prices: A User's Guide to ERS Analysis.” Economic Research Service, Food and Consumer Economics Division. U.S. Department of Agriculture. Technical Bulletin No. 1862, 1997.
Schnept, R.High Agricultural Commodity Prices: What Are the Issues?Congressional Research Service May 2008.
Schwarz, G.Estimating the Dimension of a Model.” Annals of Statistics 6(1978:461-64.
Trostle, R. “Global Agricultural Supply and Demand: Factors Contributing to the Recent Increase in Food Commodity Prices.” Economic Research Service. United States Department of Agriculture, 2008.
Urbanchuk, J.M “The Relative Impact of Corn and Energy Prices in the Grocery Aisle.” LECG, LLC, 2007.
Yu, Tun-Hsiang, Bessler, D.A., and Fuller, S.Cointegration and Causality Analysis of World Vegetable Oil and Crude Oil Prices.” Paper presented at the American Agricultural Economics Association Annual Meeting, Long Beach, CA, July 23-26, 2006.
Zhang, Q., and Reed, M.Examining the Impact of the World Crude Oil Price on China's Agricultural Commodity Prices: The Case of Com, Soybean, and Pork.” Paper presented at the South Agricultural Economics Association Annual Meeting, Dallas, TX, February 2-5, 2008.



Altmetric attention score

Full text views

Total number of HTML views: 0
Total number of PDF views: 0 *
Loading metrics...

Abstract views

Total abstract views: 0 *
Loading metrics...

* Views captured on Cambridge Core between <date>. This data will be updated every 24 hours.

Usage data cannot currently be displayed