Assessing the Impact of Climate Risks on Agricultural Commodity Prices in South Africa

Kenny Kutu (), Renee van Eyden (), Sonali Das () and Rangan Gupta ()
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Kenny Kutu: Department of Business Management, University of Pretoria, Pretoria, 0002, South Africa
Renee van Eyden: Department of Economics, University of Pretoria, Pretoria, 0002, South Africa
Sonali Das: Department of Business Management, University of Pretoria, Pretoria, 0002, South Africa; National Institute for Theoretical and Computational Sciences (NITheCS), South Africa
Rangan Gupta: Department of Economics, University of Pretoria, Private Bag X20, Hatfield 0028, South Africa

No 202612, Working Papers from University of Pretoria, Department of Economics

Abstract: This study analyses the impact of climate risks on the prices of agricultural commodities in South Africa, a nation with heightened levels of poverty, subsequent household food insecurity and food price sensitivities. Composite climate risks, including both physical and transition risks, are captured through a Google Trends-based Climate Attention Index for South Africa. Panel fixed effects, feasible generalised least squares and seemingly unrelated regression estimators are applied to a panel of 16 agricultural commodities for the period 2004--2024. Results show that climate risks are inflationary, possibly through supply-related channels, where climate risks reduce yields, resulting in a subsequent increase in prices. The feasible generalised least square estimation suggests that a one unit increase in the composite climate risk index can result, on average, in a 0.023 percentage point increase in real commodity price growth rates for production growth at the mean, ceteris paribus. Additionally, allowing for heterogeneity in the slope parameters through a seemingly unrelated regression model shows that real horticultural product prices are generally more sensitive to composite climate risks.

Keywords: Agriculture; Commodity Prices; Climate Attention Index; Composite Climate Risks; Panel Data; South Africa; SDG2 (search for similar items in EconPapers)
Pages: 18 pages
Date: 2026-04
New Economics Papers: this item is included in nep-agr
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