Global agricultural commodity market responses to extreme weather

• Published in: Economic research - Ekonomska istraživanja 2023-12, Vol.36 (3)
• Main Authors: Sun, Ting-Ting, Wu, Tong, Chang, Hsu-Ling, Tanasescu, Cristina
• Format: Article
• Language: English
• Subjects: Agricultural commodity prices; El Ni~no phenomenon; El Niño phenomenon; rolling-window; rollingwindow; time-varying
• ISSN: 1331-677X; 1848-9664
• DOI: 10.1080/1331677X.2023.2186913

The study investigates the time-varying correlation between El Niño phenomenon and agricultural commodity markets by employing the bootstrap full- and sub-sample rolling-window Granger causality tests. We find that the El Niño index (ENI) which measures the intensity of El Niño phenomenon, has both positive and negative impacts on agricultural commodity prices (ACP). The positive impact indicates that El Niño phenomenon may reduce the output of agriculture commodities, resulting in supply shortages and price increases. However, the negative impact suggests that affected by external uncertainties, ENI does not always cause ACP to change in the same direction. Conversely, we find ACP has negative impact on ENI, showing that agricultural commodity markets can reflect the extreme climate conditions globally in advance. The analyses can assist investors to adjust investment decisions and optimize asset allocation. Additionally, countries can improve the abnormal climate monitoring system to mitigate losses, and consider the impact of external uncertainties on agricultural commodity markets and ensure food security.