Policy options for integrated energy and agricultural markets. Transition to a Bio-Economy: Integration of Agricultural and Energy System

In the past, agricultural markets have been well integrated. Markets for different energy commodities, especially liquid energy products, also have been tightly linked. But agricultural markets and energy markets have not been closely correlated. Table 1 contains partial correlation coefficients between pairwise prices (both levels and first differences) of corn, soybeans, crude oil, gasoline, and ethanol obtained from monthly data for the period of 1982-2007. Clearly, the energy pair correlations are quite high ranging from 0.86 to 0.98, while the energy agricultural correlations are quite low, ranging from 0.13 to 0.25. The corn-soybean pair has a correlation of 0.72. Table 1. Agricultural and energy historic price correlation