Examining the multiscale interrelationship between ethanol and agricultural commodities

Kuzman, Boris and Živkov, Dejan and Andrejević Panić, Andrea (2025) Examining the multiscale interrelationship between ethanol and agricultural commodities. In: V International Scientific Conference "Sustainable agriculture and rural development". Institute of Agricultural Economics, Belgrade, pp. 541-552. ISBN 978-86-6269-141-5

Text Kuzman, Živkov, Panić Andrejević - Zbornik IEP 2025.pdf - Published Version Available under License Creative Commons Attribution Non-commercial No Derivatives. Download (358kB)

Abstract

This paper investigates the multiscale interdependence between ethanol and three agricultural commodities—corn, wheat, and soybeans—used as feedstock for ethanol production. Two wavelet approaches are applied in the analysis: wavelet coherence and wavelet cross-correlation. The first method reveals the strength of the connection, while the second indicates the leading (or lagging) interconnection between assets. According to the wavelet coherence results, the link between ethanol and agricultural commodities is relatively weak in the short term but progressively strengthens as the time horizon increases. In the short-term horizon, the strongest link is observed between ethanol and corn. Wavelet cross-correlation indicates that the short-term connection is only relevant for ethanol and corn due to their relatively strong short-term relationship. Conversely, all long-term interdependencies are relevant since strong correlations are found at higher wavelet scales. According to the results, larger agricultural markets tend to lead the smaller ethanol market in most cases.

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