Confluence of COVID-19 and the Russia-Ukraine conflict: Effects on agricultural commodity prices and food security

Abstract

The study investigates the effects of the Russian-Ukrainian war, the COVID-19 pandemic, and exchange rate fluctuations on the average return, contagion dynamics, and persistence of risks associated with three staples in Türkiye: wheat, sunflower oil, and corn. The pandemic and the war disrupted the grain, oil seed, and fertilizer supply from Russia and Ukraine to Türkiye and several Middle Eastern and African countries, risking food insecurity. The specified VECM-Asymmetric BEKK-MGARCH model estimation uses data from January 2010 to May 2023. Results show that over time, short-term deviations move towards long-term equilibrium. The presence of reciprocal causality among wheat, corn, and sunflower oil prices underscores their mutual influence. The volatility pass-through between wheat, sunflower oil, and corn shows asymmetric transmission. Long-term uncertainty stemming from one market exacerbates that market's uncertainty but mitigates risks affecting other markets. The volatility can be reduced through domestic production expansion through comprehensive policies enhancing rural area development, assuring farmer access to inputs, and implementing market risk mitigating measures. Results also show that the effects of the pandemic and the Russia-Ukraine war have been amplified by exchange rate fluctuations. Market risk mitigation could involve the agricultural exchange to support an expanded number of licensed grain warehouses. In a broader scholarly context, this study stresses the interaction between global shocks, market uncertainty, and safeguarding the nation's food security.

Keywords

• Staple commodity
• COVID-19
• Russia-Ukraine war
• Price volatility
• Volatility spillover