Role of Crude Oil in Determining the Price of Corn in the United States: A Non-parametric Approach

This paper explores the role of crude oil in determining corn prices for data on the weekly front future prices in the United States. With 38% of corn production allocated toward fuel ethanol, a possible effect of crude oil price variation on corn price fluctuations is theoretically indicated. To test this theory, two complementary approaches-a parametric multiple regression and a non-parametric multivariate adaptive regression splines approach are employed. Along with indicating a weak relationship between corn and crude oil prices, the results suggest that corn price responds nonlinearly to the changes in soybean and wheat prices.