Multifractal dynamics of Brazilian corn and ethanol markets

Purpose This study examines whether the recent expansion of corn-based ethanol production in Brazil has altered the local cross-correlation dynamics between corn and ethanol prices. Design/methodology/approach Weekly prices of hydrated ethanol and spot corn markets covering the 2015/16–2024/25 crop years were analyzed. The sample was divided into pre- and post-expansion periods to evaluate the changes associated with the growth of corn-based ethanol production. The analysis employs Multifractal Detrended Fluctuation Cross-Correlation Analysis (MF-X-DFA) to capture persistence and multifractal properties across different fluctuation regimes. Findings The results indicate persistent long-term cross-correlations between corn and ethanol prices. However, the effects of the expansion of corn-based ethanol production are heterogeneous and vary by region. More pronounced integration was observed in Mato Grosso, where the cross-correlations became more homogeneous and persistent. At the state level, ethanol markets exhibited stronger multifractal dynamics in the post-expansion period, suggesting an increase in the complexity of domestic ethanol price formation. Research limitations/implications The analysis is limited by the availability of ethanol price data in some producing regions and a relatively short post-expansion period. Practical implications These findings suggest that market participants may need to adapt risk management strategies to increasingly complex and region-specific price interactions, while policymakers should account for regional heterogeneity in designing biofuel and agricultural market policies. Originality/value This study provides the first multifractal cross-correlation analysis of regional corn and ethanol markets in Brazil, offering new evidence on how the expansion of corn-based ethanol production affects price dynamics in the emerging biofuel economy.