Price Interaction Between Crude Oil, Selected Grains, and Oilseeds in South Africa

Kgabo Lucracia Ledwaba, Chiedza Muchopa and Abenet Belete
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Kgabo Lucracia Ledwaba: Department of Agricultural Economics, University of Limpopo, Polokwane 0727, South Africa
Abenet Belete: Department of Agricultural Economics, University of Limpopo, Polokwane 0727, South Africa

Sustainability, 2025, vol. 17, issue 2, 1-20

Abstract: The dynamic interaction between crude oil prices and the prices of grains and oilseed is critical yet a complex issue in agriculture given the potential impact of the energy sector price fluctuations on production costs, transportation, and processing. This study explores the interactions between prices of crude oil, key grains, and oilseeds (maize, soybean, and wheat) in South Africa from 2018 to 2022. Utilising monthly data, this study employs the Auto-Regressive Distributed Lag (ARDL) model to assess the short-term and long-term relationships, and the Granger causality test to determine the causality directions. Results revealed a mixed long-term cointegration wherein crude oil prices and the prices of maize as well as soybean have a relationship, but no evidence of such a relationship exists for wheat prices. Additionally, no short-term effects were observed, suggesting that immediate fluctuations in crude oil prices do not influence the prices of maize, soybean, and wheat. Instead, short-term prices movements of the grains and oilseeds may be driven by other factors that could be of interest to policymakers. Furthermore, the Granger causality findings show no causality direction between prices of crude oil and the selected grain and oilseed. These findings challenge the presumed direct connection between energy and agricultural prices, thus offering policymakers a perspective to redirect their focus to formulate short-term price policy strategies that decrease dependability on crude oil to promote sustainability in the agricultural sector without disrupting the progress towards achieving Sustainable Development Goal 2 of ending hunger.

Keywords: crude oil; oilseeds; grains; sustainability; Granger causality; short run; long run; ARDL (search for similar items in EconPapers)
JEL-codes: O13 Q Q0 Q2 Q3 Q5 Q56 (search for similar items in EconPapers)
Date: 2025
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