How market efficiency and the theory of storage link corn and ethanol markets

Mindy L. Mallory, Scott H. Irwin, Dermot J. Hayes

Research output: Contribution to journalArticlepeer-review


This article uses the theories of market efficiency and supply of storage to develop a conceptual link between the corn and ethanol markets and explores statistical evidence for the link. We propose that a long-run no-profit condition is established in distant futures markets for ethanol, corn and natural gas and then use the theory of storage to define an inter-temporal equilibrium among these prices. The relationship shows that under certain conditions, future price expectations will influence nearby futures prices and that a short-term relationship between input and output prices will exist. We demonstrate validity of the theory using a structural price model and then by means of time-series techniques.

Original languageEnglish (US)
Pages (from-to)2157-2166
Number of pages10
JournalEnergy Economics
Issue number6
StatePublished - Nov 2012


  • Arbitrage
  • Cointegration
  • Corn
  • Energy
  • Ethanol
  • Futures
  • Price-analysis
  • Storage

ASJC Scopus subject areas

  • Economics and Econometrics
  • Energy(all)

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