Russia-Ukraine conflict and the quantile return connectedness of grain futures in the BRICS and international markets

TL;DR

This paper analyzes how the Russia-Ukraine conflict affects the interconnectedness of grain futures markets in BRICS and globally, revealing heterogeneity across market states and implications for risk management.

Contribution

It introduces a dynamic quantile VAR approach with frequency-domain analysis to examine spillovers in grain futures during geopolitical crises.

Findings

Spillovers are higher in tail quantiles, exceeding 95% in some cases.

Regional proximity and grain type influence connectedness strength.

Short-term market components dominate total spillovers.

Abstract

This study investigates quantile-based connectedness among BRICS and international grain futures around the Russia-Ukraine conflict and milestones of the Black Sea Grain Initiative. Using a dynamic quantile VAR combined with a frequency-domain decomposition, we trace spillovers across market states and horizons. Spillovers are heterogeneous across quantiles, as the time-varying total connectedness index hovers near 95% in the tails, remains well above the median, and is higher before the outbreak than after. Furthermore, grain type and regional proximity strengthen pairwise connectedness. South African grain futures are persistent net receivers, whereas Argentine grain futures, U.S. soybean, and Ukrainian wheat are key transmitters. In the frequency domain, short-term components dominate total spillovers. In portfolio applications, the minimum connectedness portfolio delivers a positive Sharpe ratio under both normal and lower tail conditions. Overall, the results inform asset allocation and risk management in grain futures markets under geopolitical instability and support policy formulation.