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Agricultural Policy Review

Abstract

As the biofuel industry has developed, there has been a lot of discussion about the linkages between the energy and agricultural markets. The growth of the ethanol and biodiesel sectors bolstered the connection among the oil, gas, and crop markets. As crop-based biofuels compete in the energy market, crop prices are directly impacted not only by the relative standing of biofuels in the fuel hierarchy, but also by general shifts in energy supplies and demands. However, there is another distinct way energy markets can impact crop markets—many US international trade partners are reliant on the energy sector as a major source of income. Thus, energy market swings can translate into significant income movements for those countries, influencing their ability to purchase US agricultural products. In this article, we examine the robustness of treating a key energy commodity—crude oil—as an indicator for income for those oil-reliant countries and investigate how that affects their demand for US crop exports.

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