RESEARCH ARTICLE Analysis of the Impact of Ethanol Production on Agricultural Product Prices in Brazil Mansoor Maitah 1 • Petr Procha ´zka 1 • Lubos ˇ Smutka 1 • Kamil Maitah 2 • Vladimı ´r Honig 3 Received: 5 December 2018 / Accepted: 19 January 2019 Ó Society for Sugar Research & Promotion 2019 Abstract The last ten years have seen with intense price volatility in the commodities markets, especially within the energy sector. This fluctuation has had serious implications on markets all over the world. From an increased dependence on renewable energy sources, to potential climate change impacts on global markets, commodities markets continue to face unpredictable and explosive price instabilities. In 2015, Brazil experienced an unprecedented increase in the price of ethanol. It is believed that due to that increase, Brazil consequently witnessed a surge in food prices. The primary objective of this paper is to quantitatively analyze the relationship between ethanol production and agricultural commodity prices. Our analysis confirmed that the increase in ethanol production had an impact on the price of sugar, wheat, corn and barley. This conclusion was drawn after conducting a series of statistical tests, unit roots and price pairing cointegration estimates. The multitude of tests that were conducted demonstrates a clear link between food price fluctuations in Brazil and ethanol price spikes. Keywords Ethanol Á Brazil Á Energy Á Agricultural products Á Econometrics Introduction In Brazil, ethanol can be produced from any feedstock that contains abundant natural sugars or starches that can be converted into sugar. Ethanol can be produced from crops such as soybeans; however, the production of ethanol in Brazil comes mainly from sugarcane. Sugarcane is one of the most efficient feedstocks for biofuel production within the country. Brazil is a leader in both ethanol production and use; and because of this, it has achieved greater energy security. This is thanks to its focused commitment to developing a competitive sugarcane production industry and making ethanol a key part of its energy mix. Brazil has replaced almost 42 percent of its gasoline dependence with ethanol and is currently the world’s largest sugarcane ethanol producer and a pioneer in using ethanol as a motor fuel. In the period from 2015 to 2016, Brazilian ethanol production reached 30.23 billion liters (8 billion gallons). Most of this production is being absorbed by the domestic market where it is sold as either pure ethanol fuel or blended with gasoline. All gasoline sold in Brazil includes a blend of between 18 and 27.5 percent ethanol. Brazil first began using ethanol in vehicles as early as the 1920s, and the trend gained further traction during the oil crisis of the 1970s. However, sugarcane ethanol’s popularity really exploded in 2003 with the introduction of flex-fuel vehicles that run on either gasoline or pure ethanol. Ninety percent of new cars sold in Brazil today utilize flex-fuel technology Electronic supplementary material The online version of this article (https://doi.org/10.1007/s12355-019-00709-w) contains sup- plementary material, which is available to authorized users. & Mansoor Maitah maitah@pef.czu.cz 1 Department of Economics, Faculty of Economics and Management, The Czech University of Life Sciences Prague, Kamy ´cka ´ 129, 165 00 Praha 6 – Suchdol, Czech Republic 2 Department of Trade and Finance, Faculty of Economics and Management, The Czech University of Life Sciences Prague, Kamy ´cka ´ 129, 165 00 Praha 6 – Suchdol, Czech Republic 3 Department of Strategy, The Faculty of Business Administration, The University of Economics, na ´m. Winstona Churchilla 4, Praha 3, Czech Republic 123 Sugar Tech https://doi.org/10.1007/s12355-019-00709-w