Multiscale risk spillovers and external driving factors: Evidence from the global futures and spot markets of staple foods

TL;DR

This study analyzes risk spillovers in global staple food markets, revealing key transmission patterns and external factors influencing volatility, with implications for policy and market stability.

Contribution

It introduces a comprehensive framework combining decomposition, risk connectedness, and machine learning to understand and quantify risk spillovers in food markets.

Findings

Short-term components are most volatile.

Futures markets are more volatile than spot markets.

Price drivers and external uncertainties significantly impact risk spillovers.

Abstract

Stable and efficient food markets are crucial for global food security, yet international staple food markets are increasingly exposed to complex risks, including intensified risk contagion and escalating external uncertainties. This paper systematically investigates risk spillovers in global staple food markets and explores the key determinants of these spillover effects, combining innovative decomposition-reconstruction techniques, risk connectedness analysis, and random forest models. The findings reveal that short-term components exhibit the highest volatility, with futures components generally more volatile than spot components. Further analysis identifies two main risk transmission patterns, namely cross-grain and cross-timescale transmission, and clarifies the distinct roles of each component in various net risk spillover networks. Additionally, price drivers, external uncertainties, and core supply-demand indicators significantly influence these spillover effects, with heterogeneous importance of varying factors in explaining different risk spillovers. This study provides valuable insights into the risk dynamics of staple food markets, offers evidence-based guidance for policymakers and market participants to enhance risk warning and mitigation efforts, and supports the stabilization of international food markets and the safeguarding of global food security.