The Impact of Meteorological Factors on Crop Price Volatility in India: Case studies of Soybean and Brinjal

Ashok Kumar, Abbinav Sankar Kailasam, Anish Rai, Manya Khanna, Sudeep Shukla, Sourish Das and Anirban Chakraborti

Papers from arXiv.org

Abstract: Climate is an evolving complex system with dynamic interactions and non-linear feedback mechanisms, shaping environmental and socio-economic outcomes. Crop production is highly sensitive to climatic fluctuations (and many other environmental, social and governance factors). This paper studies the price volatility of agricultural crops as influenced by meteorological variables, which is critical for agricultural planning, sustainable finance and policy-making. As case studies, we choose the two Indian states: Madhya Pradesh (for Soybean) and Odisha (for Brinjal/Eggplant). We employ an Exponential Generalized Autoregressive Conditional Heteroskedasticity (EGARCH) model to estimate the conditional volatility of the log returns from 2012 to 2024. We further explore the cross-correlations between price volatility and the meteorological variables followed by a Granger-causal test to analyze the causal effect of meteorological variables on the volatility. The Seasonal Auto-Regressive Integrated Moving Average with Exogenous Regressors (SARIMAX) and Long Short-Term Memory (LSTM) models are implemented as simple machine learning models of price volatility with meteorological factors as exogenous variables. Finally, to capture spatial dependencies in volatility across districts, we extend the analysis using a Conditional Autoregressive (CAR) model to construct monthly volatility surfaces that reflect both local price risk as well as geographic dependence. We believe, this paper will illustrate the usefulness of simple machine learning models in agricultural finance, and help the farmers to make informed decisions by considering climate patterns and making beneficial decisions with regard to crop rotation or allocations. In general, incorporating meteorological factors to assess agricultural performance could help to understand and reduce price volatility and possibly lead to economic stability.

Date: 2025-03, Revised 2025-06
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

Downloads: (external link)
http://arxiv.org/pdf/2503.11690 Latest version (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:arx:papers:2503.11690

Access Statistics for this paper

More papers in Papers from arXiv.org
Bibliographic data for series maintained by arXiv administrators ().