The influence of US biofuel production and global energy prices on local food prices in Latin American countries: a time‐varying analysis

Abstract Addressing the global food crisis (GFC) is a pressing priority. Biofuel production and global energy prices are often influential factors in shaping local food prices in developing nations but only limited research has quantified their dynamic effects on domestic food prices in some countries. This study investigates how external factors affected food prices in six Latin American countries from January 2006 to January 2023. These factors included US ethanol production, market speculation, and international energy and food price indices. Using a time‐varying parameter vector autoregression (TVP‐VAR)‐based extended joint connectedness model, the study reveals that US ethanol production had a significant impact on food prices in all target countries during the 2006–2007 period, with varying degrees of influence in subsequent years. Speculation also affected domestic food prices, particularly in the Dominican Republic, Argentina, and Paraguay. International energy prices also emerged as a key determinant of local food prices. The connection between international and domestic food prices was especially pronounced during the 2006–2007 period, with Paraguay being notably affected due to its substantial corn exports. Our results offer important insights for future climate, agriculture, and energy policies, providing valuable guidance for addressing regional food security challenges.