Price interrelationships in the vegetable and tropical oils market

Abstract

The relationship between vegetable and tropical oils prices is investigated utilizing a vector autoregressive approach. Despite the apparent similarities between these oil prices in terms of their general pattern of movement over time, the relationships were not found to be strong enough to label them as 'cointegrated series'. Further analysis indicates that substitution relationships appear to drive price movements in the short run, while market-based structural factors for each of the oils are important elements in the price formation process in the long run.