Volatility spillover and connectedness between ethanol and agricultural commodities in the crisis cycles and the new production dynamics in Brazil

• Grant number: 23/13145-9
• Support Opportunities: Regular Research Grants
• Start date: December 01, 2023
• End date: November 30, 2025
• Field of knowledge: Applied Social Sciences - Economics - Agrarian and Natural Resource Economics
• Principal Investigator: Daniel Henrique Dario Capitani
• Grantee: Daniel Henrique Dario Capitani
• Host Institution: Faculdade de Ciências Aplicadas (FCA). Universidade Estadual de Campinas (UNICAMP). Limeira , SP, Brazil
• Associated researchers: Fabio L Mattos ; José César Cruz Júnior ; Luiz Eduardo Gaio ; Rodrigo Lanna Franco da Silveira

Abstract

Biofuel production has exhibited a significant expansion since the 2000s in Brazil, which introduced a debate about sugarcane land use change and its impacts on agricultural production, prices, and volatilities. Recently, the Brazilian Midwest has experienced a substantial increase in corn ethanol production, which sheds light on new connectedness patterns in local grain and ethanol prices. Additionally, global agricultural commodities price volatilities have exhibited greater movements since de 2006-08 period. This behavior has been largely strong since the Covid-19 pandemic and the Russia-Ukraine conflict. An increase in linkages between agricultural and energy commodities has been observed. Thus, to guide these themes, this project had three main objectives. First, we examine the connectedness and volatility spillovers among Brazilian ethanol and agricultural markets since the sugarcane expansion period. Second, this study proposes to evaluate the impacts of recent international crisis cycles on Brazilian ethanol energy and agricultural commodities and their connection with the international market. Third, the project aims to assess the new dynamics and spillover effects on ethanol and cord price volatilities in Midwest Brazil, considering the increase in corn ethanol production. To this end, the project proposes the use of a TVP-VAR to evaluate volatility connectedness and spillover effects, a multifractal model to assess cross-correlation, and the wavelet coherence method to investigate connectedness time frequency. Overall, this study can subsidize the literature in the field of biofuels and food, as well as in the discussion of the crisis cycles in agricultural commodities volatilities in an emerging market. In addition, the project can contribute for the understanding of the new dynamics derived from corn ethanol expansion in Brazil, providing new elements and thoughts. (AU)

Scientific publications

(References retrieved automatically from Web of Science and SciELO through information on FAPESP grants and their corresponding numbers as mentioned in the publications by the authors)

DANIEL HENRIQUE DARIO CAPITANI; LUIZ EDUARDO GAIO. Conectividades dinâmicas e transbordamento de volatilidade entre os mercados agrícolas brasileiros após a pandemia da Covid-19. Estud. Econ., v. 54, n. 4, 2025-01-10. (23/13145-9)