HOW DO OIL PRICE CHANGES IMPACT THE MAJOR AGRICULTURAL COMMODITIES IN DIFFERENT MARKET CONDITIONS AND IN DIFFERENT TIME-HORIZONS?

This paper investigates how do oil price changes affect the major agricultural commodities (barley, corn, rice, soybean and wheat) in the different time-horizons and in the different market conditions. For computation purposes we employ a wavelet-based quantile approach. We find strong transmission effect from oil only in the tail quantiles in the longer time-horizons, which is especially true for barley, corn and soybean. It is an indication that the agricultural commodities are affected by oil in the periods of increased market turbulence, regardless of whether it is characterized by increasing or decreasing prices of these commodities. Barley and corn experience the spillover effect in the periods of the rising agricultural prices, and this impact reaches almost 30% in the long-term horizon. The wavelet cross-correlation results provide strong evidence that corn and soybean lead oil in midterm and long-term horizons.