Felipe G. Avileis

Working Papers

Commodity Volatility in the Biofuel Era [FULL PAPER HERE]

Abstract: How do biofuel mandates affect agricultural commodity price volatility? Using variation from the Renewable Fuel Standard and the Renewable Diesel boom, I find that biofuel policies increased corn price volatility by 23% and soybean oil price volatility by 18% through two distinct mechanisms. First, mandates rebalanced demand portfolios by increasing the share of agricultural commodities used for fuel production and by strengthening the transmission of energy market shocks to agricultural markets. Second, mandates steepened domestic demand curves, amplifying price responses to supply shocks. Increased agricultural price volatility has significant economic consequences, increasing crop insurance premiums and hedging costs, imposing additional costs to farmers and the US government. These findings reveal an unintended cost of biofuel policies and demonstrate how these policies can fundamentally change commodity risk profiles.

When Biofuel Policy Speaks (and Leaks): Returns and Pass-Through in the Soybean Complex (w/ Andrew Swanson and Scott Irwin) [first draft coming out soon]

Abstract: How do biofuel policy announcements affect the soybean complex in the US? Using an event study approach, we analyze Environmental Protection Agency (EPA) announcements, Energy Information Administration (EIA) and California Air and Resource Board (CARB) reports, and news ``leaks" from media sources with early information access. We find that soybean oil futures volatility increases significantly, by 1.22% on event days, 85% higher when compared to non-event days. The informational value of these biofuel policy signals is as large as that of major USDA WASDE reports.  We leverage these news shocks to estimate the pass-through of soybean oil returns to the rest of the soybean complex. Our analysis reveals that a 10% biofuel-induced price increase in soybean oil leads to a 2.1% rise in soybean prices and a 1.8% drop in soybean meal prices, increasing crush margins by 1.1%. These results show that the last increase in the RFS, in June 2025, added $1.35 billion in value to US soybean farmers.

Local Policies, Global Markets: The effects of biofuel mandates on international agricultural trade and land use [first draft coming out soon]

Abstract: US biofuel policies aim at supporting the domestic farm sector, increasing US energy independence, and reducing emissions. However, since the implementation of the Renewable Fuel Standard, US net exports of vegetable oils, a key input for biofuel production, have deteriorated by 600%, mainly driven by surges in imports. This paper examines whether regulatory guardrails successfully contain policy effects domestically or enable international spillovers through global markets. Leveraging policy-driven shocks to biofuel credit prices and employing panel local projections across 11 countries and 21 US states, I estimate that a 10% increase in credit prices increases US oilseed acreage by 1%, but also increases foreign acreage by 0.6%. This is over 500,000 acres in Brazil alone. US net exports of vegetable oil deteriorate, driven by a 4% increase in imports. These findings reveal inefficiencies in achieving the intended farmer support and trade policy outcomes of biofuel policies. 

The "Real" Cost of Brazilian Currency Volatility for US Soybean Farmers (w/ Leonard Twizeyimana) [first draft coming out soon]

Policy Giveth and Policy Taketh Away: Estimating Market Integration Parameters for Renewable Diesel Feedstocks (w/ Andrew Swanson, Shawn Arita, Matt Gammans, Jeff O'hara)  [first draft coming out soon]

Published Work

The impact of Brazil on global grain dynamics: A study on cross-market volatility spillovers (w/ Mindy Mallory) [full text here]

Published at Agricultural Economics (January, 2022)

Abstract: Brazil’s rise as a global powerhouse producer of soybeans and corn over the past 15 years has fundamentally changed global markets in these commodities. Brazil’s rise is arguably due to the development of varieties of soybean and corn adapted to climates within Brazil, allowing farmers to double-crop corn after soybeans in the same year. Corn and soybean market participants increasingly look to Brazil for fundamental price information, and studies have shown that the two markets have become cointegrated. However little is known about how much volatility from each market spills over to the other. In this article, we measure volatility spillover ratios between U.S. and Brazilian first crop corn, second-crop corn, and soybeans. We find that linkages between the two countries increased after double-cropping corn after soybeans expanded, volatility spillover magnitudes expanded, and the direction of volatility spillovers flipped from U.S. volatility spilling over to Brazil before double cropping, to Brazil spilling over to U.S. after double cropping.

Other Publications

The California Low Carbon Fuel Standard and Its Consequences (w/ Colin Carter, Jens Hilscher, Andrew Swanson and Aaron Smith) [full text here]

Published at ARE Update - May/June 2024

How the California Low Carbon Fuel Standard Resulted in a Renewable Diesel Boom (w/ Colin Carter and Jens Hilscher)  [full text here]

Published at ARE Update - May/June 2024

California’s proposed cap on crop-based biofuels and what it means for credit prices and producers (w/ Andrew Swanson) [full text here]

Published at ARE Update -  November/December 2024

The chilling effects of cold snaps on futures, options and risk management costs (w/ Jens Hilscher) [full text here]

Published at ARE Update - January/ February 2025