When global tensions hit the table: geopolitical risk and Brazil’s food prices

Purpose The study investigates the inter-linkages between geopolitical risk (GPR) and food price (FP). Design/methodology/approach By employing the bootstrap full- and sub-sample rolling-window Granger causality tests. Findings The empirical results show that there is a time-varying bidirectional causality between GPR and FP. High GPR leads to a rise in FP, suggesting that geopolitical events usually may disrupt supply and demand conditions in food markets, and even trigger global food crises. However, the negative effect of GPR on FP does not support this view in certain periods. This is mainly because GPR is also related to the global economic situation and oil price, which together have impacts on the food market. These results cannot always be supported by the inter-temporal capital asset pricing model, which states that GPR affects FP in a positive manner. Conversely, there is a positive impact of FP on GPR, indicating that the food market is an effective tool that can reflect global geopolitical environment. Originality/value In the context of the Russia–Ukraine conflict, these analyses can assist investors and policymakers to understand the sensitivity of FP to GPR. Also, it will provide significant revelations for governments to attach importance to the role of food price information in predicting geopolitical events, thus contributing to a more stable international environment.

PurposeThe study's objective is to measure the response of the food prices to the aggregate and disaggregate geopolitical risk events, Russia's geopolitical risks and global energy prices in the context of two European regions, i.e. Eastern and Western Europe covering the monthly data from January 2001 to March 2022.Design/methodology/approachThe authors apply a novel and sophisticated econometric method, the cross-quantilogram (CQ) approach, to analyse the authors’ monthly data properties. This method detects the causal relationship between the variables under the bi-variate modelling approach. More importantly, the CQ procedure divulges the bearish and bullish states of the causal association between the variables under short, medium and long memories.FindingsThe authors find that aggregate measures of geopolitical risk reduce food prices in the short term in the Eastern Europe but increases food prices in the Western Europe. Besides, the decomposed measures of geopolitical risk “threats” and “acts” have heterogeneous effects on the food prices. More importantly, Russia's geopolitical risk events and global energy prices enhance the food inflation under long memory.Research limitations/implicationsThe authors provide diverse policy implications for Eastern and Western Europe based on the authors’ findings. First, the European policymakers should take concrete and joint policy measures to tackle the detrimental effects of geopolitical risks to bring stability to the food markets. Second, this region should emphasize utilizing their unused agricultural lands to grow more crops to avoid external dependence on food. Third, the European Union and its partners should begin global initiatives to help smallholder farmers because of their contribution to the resilience of disadvantaged, predominantly rural communities. Fourth, geopolitically affected European countries like Ukraine should deal with a crippled supply chain to safeguard their production infrastructure. Fifth, fuel (oil) scarcity in the European region due to the Russia-Ukraine war should be mitigated by searching for alternative sources (countries) for smooth food transportation for trade. Finally, as Europe and its Allies impose new sanctions in response to the Russia-Ukraine war, it can have immediate and long-run disastrous consequences on the European and the global total food systems. In this case, all European blocks mandate cultivating stratagems to safeguard food security and evade a long-run cataclysm with multitudinous geopolitical magnitudes for European countries and the rest of the world.Originality/valueThis is the maiden study that considers the aggregated and disaggregated measures of the geopolitical risk events, Russia's geopolitical risks and global energy prices and delves into these dynamics' effects on food prices. Notably, linking the context of the Russia-Ukraine war is a significant value addition to the existing piece of food literature.

Type of the article: Research Article Food security is a major worldwide concern that has received heightened focus due to the COVID-19 pandemic, which disrupted global food supply chains and agri-food value networks. This paper seeks to determine the threshold at which food security is considered vulnerable to geopolitical shifts. Thus, using a dynamic panel threshold model on a sample of 40 countries, covering both advanced and emerging economies, this paper explores the link between food security – measured by the Global Food Security Index (GFSI) and its four key pillars (affordability, availability, quality and safety, sustainability and adaptation) and geopolitical tensions, represented by the Geopolitical Risk Index (GPRI), over the period from 2012 to 2021. The analysis also accounts for key variables such as agricultural land use, the impact of COVID-19, shares of urban population, price levels, and GDP per capita. The main findings indicate that the inflationary impact of geopolitical risk is statistically significant. A point (threshold value) of 0.022 was identified for geopolitical risk, beyond which global food security is substantially weakened due to increased inflation. The findings reveal that geopolitical risks exacerbate price surges across key commodities, including fertilizers, food, and oil, thereby amplifying inflationary pressures arising from fiscal measures taken in response to geopolitical shocks. Moreover, elevated geopolitical risks heighten uncertainty regarding the inflation outlook, complicating trade-offs between monetary and fiscal policies.Acknowledgment This work was sponsored by the Economic Research Forum (ERF) and has benefited from both financial and intellectual support. The views expressed in this work are entirely those of the author(s) and should not be attributed to ERF, its Board of Trustees, or donors.

Causality of geopolitical risk on food prices: Considering the Russo–Ukrainian conflict

We investigate the influence of geopolitical risk on domestic food prices in 12 economies (BRICS and the G7) using a global vector autoregressive (GVAR) approach from 2003M1 to 2022M9. The results show that geopolitical risk shocks cause increases in international prices (oil, agricultural, and general commodity prices). We found that these shocks also provoke fluctuations in domestic food prices. The variance decomposition indicated that international prices and geopolitical risk contribute to the formation of domestic food prices. Finally, the estimates suggest relevant differences between the formation of domestic food prices in BRICS and G7 countries.

ABSTRACTThis study investigates the complex relationship between geopolitical risk and food inflation, a critical issue for global food security. Using panel data from 177 countries from 2019 to 2021, the research employs a random effects estimation model to analyze the dynamic. The central aim is to ascertain if countries with higher geopolitical risk also experience greater food inflation. The analysis confirms a positive correlation, where increased country instability is associated with higher food inflation. The study also reveals a counterintuitive positive relationship between GDP per capita and food inflation, challenging common economic assumptions. These findings have significant implications for economic policy and international cooperation, highlighting the need for strategies to mitigate the impacts of geopolitical instability on food prices and bolster food security.

This study aims to investigate how global food prices are affected by uncertainties, risks, and volatilities for the period from January 1997 to June 2024 on a monthly basis. To detect regime changes and reveal different economic relations in each regime, the Markov-switching regression method, which considers the non-linear structures of the variables, is preferred. The periods represented by Regime 0 often coincide with periods of high uncertainty and crisis, such as the 2007–2009 Global Financial Crisis, the 2010–2011 Eurozone Debt Crisis, and the 2020–2022 COVID-19 pandemic. Regime 1, which covers periods other than these, represents the normalization periods. The findings provide evidence that when food prices tend to increase (during crisis periods), this increase is significantly affected by geopolitical risks and equity market volatility. When food prices tend to decline (during normalization periods), they are strongly affected by cost factors such as oil prices and weakly affected by global economic policy uncertainty. Policymakers are advised to focus on global uncertainties and risks to anticipate fluctuations in global food prices.

This study investigates the relationship between heightened geopolitical risks and food price inflation using a panel data model that includes 33 countries from 2001 to 2020. Key findings show that geopolitical risks significantly raise the level of food price inflation, with a more pronounced effect observed in developing countries, and a reduced effect in countries characterized by high levels of individualism and masculinity. Furthermore, the effect of geopolitical risks on food inflation is moderated during economic booms and amid climate change concerns. In addition, we find that countries with strong connections to major food producers experience less impact from geopolitical risks. The study concludes that geopolitical risks are a crucial factor in food price inflation, particularly for vulnerable countries, suggesting that they should incorporate geopolitical considerations into their economic policies and strengthen ties with major food producers to mitigate this risk.

Purpose. The most recent conflicts have demonstrated that geopolitical risk has evolved into a significant issue that has an impact on the global food markets. Through the use of bi-wavelet coherence analysis, the study aimed to establish the ways in which geopolitical risk and climate policy uncertainties influences the food commodity market using Geopolitical Risk Index (GPR index), Climate Policy Uncertainty Index (CPU index) and the five components that make up the FAO Food Price Index (FPI). Methodology / approach. The study used monthly data spanning from January 1990 to March 2024. Geopolitical risk was measured using the GPR index developed through textual analysis of news articles. CPU index, developed using similar textual analysis, is used to represent the uncertainties related to climate change risk. The FAO’s FPI constituents were used to represent global food commodity market. The research applied advanced econometric methods including Johansen cointegration tests, Toda-Yamamoto causality analysis, Brock-Dechert-Scheinkman (BDS) nonlinearity tests, and bi-wavelet coherence analysis. Wavelet coherence analysis was particularly focused due to its capability to capture dynamic, time-frequency relationships among non-stationary data series. Results. The study found two significant long-run cointegrating relationships among GPR, CPU and FPI constituents. Causality tests indicated that geopolitical risk significantly influenced climate policy uncertainty but not vice versa. Wavelet analysis revealed that GPR and vegetable oil has more strong co-movement, and it is also the same in the case of CPU. CPU has a leading influence on GPR, which means that policy uncertainties lead to increased geopolitical tensions. Uncertainties in climate policies have an effect on food commodity market in the short run. Whereas, GPR affects cereals during geopolitical tension periods. In the case of dairy products, time varying co-movements in the short run could be witnessed whereas in the long run medium co-movement could be seen. Volatilities occur in the prices of vegetable oils during periods of crisis which can exacerbate prices of other food commodities, which can lead to food security issues. Originality / scientific novelty. The originality of the study lies in the fact that the main focus is on GPR, CPU and five constituents of FAO’s FPI. Moreover, the study uniquely incorporates CPU index as a proxy to climate change risk and its impact on food commodity market. Most of the studies focus on the spillover effect of geopolitical risk on different classes of asset. Significant number of literatures focus on the spillover effect on oil market, stock market and commodities market. However, there are only limited studies that focus on food commodity market. In addition, analysing these factors provides a deeper understanding of how they affect food security and market dynamics. This innovative approach offers valuable insights to policymakers, investors and stakeholders of food commodity market. Practical value / implications. Creating a more economically sustainable environment is the goal of every country, which requires joint efforts by various sectors of the financial market, government officials and economic regulators. These findings are of great importance to policymakers and stakeholders in global food systems, highlighting the need to create adapted policy frameworks, focus on the vulnerability of individual commodities, and carefully implement climate policies to mitigate potential negative impacts on food security.

We investigate fat tails and network interconnections of geopolitical risk index and food prices, including the price of corn, rice, and wheat, using seven Bayesian vector heterogeneous autoregression fashions. This paper differentiates dynamically between network interlinkages between these variables during the short, medium, and long runs. We found some noteworthy results in our study. In the first place, network interlinkages exhibit remarkable differences over time. Interlinkages between variables in our designed networks are increased in the short, medium, and long term due to transient events occurring in markets during the studied period. During the Russia-Ukraine conflict, the long-term ties within the system are more significantly impacted. Additionally, based on net-directional linkages, each market's role shifts (from sending to receiving shock and vice versa) during the pre- and post-Ukraine-Russia conflict, whereas these roles persist during the COVID-19 pandemic. Observations of short- and medium-term trends reveal that the geopolitical risk index is shock receivers transmitted to these markets by the rice and corn markets. The results indicate that the geopolitical risk index persists as shock receivers in terms of long-horizon measures.

ABSTRACTThis paper investigates the dynamic interactions among global economic policy uncertainty, food prices, and maritime freight rates, focusing on changes in the global food landscape since China's WTO official accession. Using a time‐varying parameter vector autoregressive model with stochastic volatility, it analyzes the impacts of economic policy changes, environmental policy, geopolitical risks, and global public health events on food and transportation markets. In addition, it explores how fluctuations in maritime freight rates may affect food prices and, consequently, global economic development. Finally, the paper offers recommendations for food import and export countries to enhance food security and promote sustainable development in food transport firms.

Oil price changes, uncertainty, and geopolitical risks: On the resilience of GCC countries to global tensions

Do geopolitical shocks threaten ESG sustainability uncertainty? Insights from individual G7 economies via wavelet and quantile-based approaches.

Given the high level of economic and financial globalization, geopolitical tensions can disrupt international trade and negatively influence financial markets. China, a global economic power, has been at the center stage of recent geopolitical tensions with widespread economic implications. We empirically investigate the effect of China’s geopolitical risk on Canada’s equity markets. The results show a persistent impact on market returns and volatility, most prominently on the resources and energy sectors. Even though China plays a smaller role than the US as a trading partner, China’s geopolitical risk significantly affects the Canadian stock market and its component sectors. Our results, therefore, support the need for a constructive approach toward alleviating global geopolitical tensions and for the development of geopolitical risk hedging strategies such as insurance and investment in commodities at the country and investor levels.

PurposeThis study examines the influence of the global geopolitical risk (GPR) on the relationship between oil prices and domestic food prices under the augmented Phillips curve framework.Design/methodology/approachUsing monthly data on Nigeria from January 1995 to December 2021, the authors accommodate symmetry and asymmetry by adopting the linear and nonlinear autoregressive distributed lag, linear and nonlinear Granger causality tests.FindingsThe study establishes the positive and significant effects of both oil prices and GPR on food prices in the long and short run, though with a small magnitude in the short run. The asymmetric model shows that, while oil price shocks (positive and negative) exert a positive influence on food prices in the long-run, the effects of oil price shocks differ when accounting for GPR in the short-run. The coefficients of the interactive term, being the moderator of GPR between oil-food prices, are positively significant across models, suggesting that they jointly influence food prices when assuming linearity. The nonlinear model shows that the positive and negative components of interactive terms exert a positively significant influence on food prices, even though food prices tend to be more reactive to positive oil price shocks. The robustness checks show a unidirectional causal flow from oil prices and GPR to food prices under the linear and nonlinear models.Originality/valueThe authors examine the moderating effect of the newly developed global GPR index of Caldara and Iacoviello (2022) on the oil–food inflation relationship in Nigeria by applying the symmetric and asymmetric approaches.