Price Dynamics in Agriculture: Investigating Relationships between Fertilizer, Energy, and Grain Prices

This thesis investigates the complex relationships between agricultural commodity prices (wheat, corn, soybeans), key fertilizer components (urea, Diammonium phosphate (DAP)), and energy sources (natural gas prices from Henry Hub and Title Transfer Facility (TTF)) from 2009 to 2023. Employing robust econometric techniques including cointegration analysis, Granger causality tests, and Autoregressive Distributed Lag (ARDL) models, the study examines both long-term equilibria and short-term dynamics within these markets. A focused sub-analysis from 2017 to 2023 highlights the intensified market dynamics during significant global economic disruptions such as the COVID-19 pandemic and geopolitical tensions from the Russia-Ukraine conflict, which have emphasized the critical interdependencies and heightened volatility across the examined markets. The findings reveal substantial long-run cointegrating relationships between natural gas, fertilizer, and agricultural commodity prices, highlighting the sensitivity of grain prices to changes in energy and fertilizer markets. Short-run dynamics indicate that price volatilities across these markets are significantly driven by sudden energy price changes, with pronounced ripple effects observed in the fertilizer and agricultural sectors. Furthermore, the sub-sample period analysis provides valuable insights into the adaptive behaviors and strategic responses within the agricultural sector in response to external economic shocks. By unveiling these intricate relationships and dependencies, this study contributes to the academic field by enhancing the understanding of the interactions between these critical commodities. Furthermore, it offers practical insights for policymakers, investors, and stakeholders within the agricultural sector. Recognizing these relationships empowers stakeholders to make more informed decisions regarding production planning, risk management, and policy formulation, aimed at enhancing food security and market stability in the face of future economic uncertainties. The research enables stakeholders to anticipate and mitigate potential disruptions, fostering a more resilient and sustainable agricultural supply chain.