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Forecasting Spot and Futures Price Volatility of Agricultural Commodities: The Role of Climate-Related Migration Uncertainty

Author

Listed:
  • Afees A. Salisu

    (Centre for Econometrics and Applied Research, Ibadan, Nigeria; Department of Economics, University of Pretoria, Pretoria, 0002, South Africa)

  • Ahamuefula E. Ogbonna

    (Centre for Econometrics and Applied Research, Ibadan, Nigeria)

  • Rangan Gupta

    (Department of Economics, University of Pretoria, Private Bag X20, Hatfield 0028, South Africa)

  • Elie Bouri

    (School of Business, Lebanese American University, Lebanon)

Abstract

We evaluate the predictive ability of the newly developed climate-related migration uncertainty index (CMUI) and its two components, the climate uncertainty index (CUI) and the migration uncertainty index (MUI), for the return volatility of agricultural commodity prices in both futures and spot markets. Employing a GARCH-MIDAS model, based on mixed data frequencies covering the period from 1977Q4 (with the earliest daily observation on October 3, 1977) to 2024Q1 (with the latest daily observation on March 29, 2024), we conduct both statistical and economic evaluations, including the Modified Diebold-Mariano test, Model Confidence Set procedure, and risk-adjusted performance metrics. The results demonstrate that integrating CUI, MUI, and CMUI into the predictive model of the return volatility of agricultural commodity prices significantly improves forecast accuracy relative to the conventional GARCH-MIDAS-RV benchmark. These findings suggest that the climate and migration related uncertainty indices are both statistically significant and economically relevant, offering enhanced predictive power and investment performance.

Suggested Citation

  • Afees A. Salisu & Ahamuefula E. Ogbonna & Rangan Gupta & Elie Bouri, 2025. "Forecasting Spot and Futures Price Volatility of Agricultural Commodities: The Role of Climate-Related Migration Uncertainty," Working Papers 202516, University of Pretoria, Department of Economics.
    • Handle: RePEc:pre:wpaper:202516
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    More about this item

    Keywords

    Climate-related Migration Uncertainty Index; Climate Uncertainty Index; Migration Uncertainty Index; Agricultural commodity prices; GARCH-MIDAS; Forecast evaluation; Economic Significance;
    All these keywords.

    JEL classification:

    • C53 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Forecasting and Prediction Models; Simulation Methods
    • D8 - Microeconomics - - Information, Knowledge, and Uncertainty
    • F22 - International Economics - - International Factor Movements and International Business - - - International Migration
    • Q02 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - General - - - Commodity Market
    • Q13 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Agricultural Markets and Marketing; Cooperatives; Agribusiness

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