The Impact of Temperature and Rainfall Volatility on Food Prices—Evidence for Uganda

While Uganda has been exposed to an increase in the frequency of extreme weather events— most commonly localised flooding, leeching and mudslides associated with increased intensity of rainfall – changes in the aggregate level patterns of rainfall and temperature have been relatively modest and have evolved relatively slowly. As a consequence, it is unsurprising that conventionally measured weather variation appears to have a modest impact on food prices at the aggregate level. Instead, this paper uses highly granular earth-observation weather data in combination with spatially disaggregated price data to examine the impact of spatial and temporal variability in rainfall and temperature on the short-run price dynamics of domestically produced staple food crops in Uganda. We find that measures of weather variability computed across the agricultural cycle do impact the evolution of prices for locally-produced agricultural commodities, but the estimated effects are fragile and relatively small. Hence, a failure to reflect these effects in near-term forecasting to inform inflation models is unlikely to lead to significantly larger forecast errors.