Felipe G. Avileis

Working Papers

Drivers of Commodity Volatility in the Biofuel Era [FULL PAPER HERE]

Abstract: This paper investigates how the increased use of corn and soybean oil as motor fuel feedstock, driven by biofuel mandates, has affected price volatility. I model and study two different volatility drivers affected by the mandates: market integration and changes in the demand curve. Using the implementation of the Renewable Fuel Standard and the Renewable Diesel boom as key events, I measure the effects of these two drivers on implied volatilities using causal inference methods and a novel set of synthetic controls. Results indicate a 19% rise in corn volatility and an 18% increase in soybean oil volatility, on average, after the implementation and expansion of biofuel mandates. In the case of corn, the higher shares of corn used for fuel and a high volatility regime in energy markets are the drivers of volatility changes. For soybean oil, the increase is mostly driven by changes in marginal demand elasticity, as growing domestic demand led to the cessation of exports.

Local Policies, Global Markets: The effects of biofuels mandates on international agricultural trade and land use [FULL PAPER HERE]

Abstract: This paper examines the global impacts of increased vegetable oil consumption for fuel, driven by the Renewable Fuel Standard (RFS) and Low Carbon Fuel Standard (LCFS), on international trade and agricultural land use. We analyze how these mandates affect US and global oilseed acreage and trade flows. Leveraging politically driven exogenous shocks to biofuel credit prices, we construct two extensive panel datasets covering acreage and trade data for the 12 major vegetable oil-producing and consuming countries and US states over 18 years. We employ local projections to estimate the impacts of biofuel mandates on global acreage and trade. Results show that a 10% increase in domestic biofuel subsidies raises US and global land use by 1% and 0.6%, respectively. US net exports deteriorate, primarily due to a 4% increase in imports. These findings reveal inefficiencies in achieving the intended farmer support and trade policy outcomes of biofuel policies. We propose a market-wide tariff on vegetable oil imports as a solution to optimize biofuel policy outcomes. 

EPA and CARB  announcements and the balancing act between soybeans, soybean oil and meal (w/ Andrew Swanson and Scott Irwin) [first draft coming out soon]

Abstract: How biofuel policy communications affect the soybean complex in the U.S.? Using an event study approach and causal inference methods, we analyze over 50 policy events between 2019 and 2025, including Environmental Protection Agency (EPA) announcements, Energy Information Administration (EIA) reports, and news "leaks" from media sources with early information access. We find that soybean oil futures returns increase significantly on announcement days (0.59%) and continue rising the following day (0.62%). The informational value of these biofuel policy signals rivals that of major USDA WASDE reports. Our causal analysis reveals that a 1% biofuel-induced price increase in soybean oil leads to a 0.19% rise in soybean prices and a 0.30% drop in soybean meal prices. These findings contribute to the food-versus-fuel debate by demonstrating that while biofuel mandates increase soybean oil prices, they simultaneously decrease soybean meal prices, partially offsetting inflationary concerns. Our results highlight the growing importance of biofuel policy signals in agricultural commodity markets and reveal the complex price dynamics within the soybean complex in response to biofuel demand shocks. 

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