Sugarcane expansion: an investigation via copulas

Abstract

The relationships between food and energy markets still remain as topics that are not exhausted in the Brazilian literature. Research on the dependency between these markets is essential for public policy makers, investors, and producers. In recent years, the increase of investments in the Brazilian sugar and alcohol sector may have caused joint movements between the regional prices of sugarcane and other substitute crops in land use. The main goal of this study was to analyze the association between the movements of the regional return prices of sugarcane and competing crops in land use, in the states of São Paulo, Mato Grosso do Sul, and Goiás. Bivariate and trivariate copulas were used to evaluate the movements in the monthly prices of sugarcane, cattle, and soybean from 2004 to 2019. The results show that the highest dependence measure (0.13) was found for the pair sugarcane x cattle, in Goiás state. The other models showed some smaller measures of dependence and others that were not significant. This suggests that, in general, the effect of expanding sugarcane plantation from the Southeast to the Midwest regions, in Brazil, did not interfere significantly with the prices of products theoretically competing in land use.