An empirical analysis of the correlation between large daily changes in grain and oil futures prices

Adopting a framework known from event studies we document patterns in the high-frequency comovement of oil and grain price changes. Using daily front month futures prices we demonstrate a closer relationship between oil and grain price changes after 2006, which suggests a change in the dynamics between grain and energy markets. We find some evidence of comovement between crude oil and grain price changes after 2006, but note that although statistically significant, these findings speak of two distinct entities rather than closely integrated markets. While our study is purely descriptive, these findings suggest that the pursuit of a causal link from oil to grain price changes is futile.