The impact of oil price shocks on the agricultural commodity prices

In this study, we empirically examine the effects of oil-related shocks on the prices of nine agricultural commodities for the period 1974:01-2022:02. We decompose real oil prices into three independent parts: oil supply shocks; global demand shocks; demand shocks that are specific to the crude oil market applying a symmetric VAR model. Then, we assess the effects of these three shocks on the prices of nine major agricultural commodities individually. Based on our findings, we reveal that the responses of agricultural commodity prices to an oil price change depend significantly on the timing and the driver of the underlying oil price change.