Chandana Nagenahally Manjunath*: Dynamic Network Analysis of ENSO-driven Global Commodity Price Volatility: Implications for Food and Energy Security
Introduction and scientific context: Since early 2000s, commodity markets have experienced rising prices and heightened volatility (i.e., risk), threatening global food and energy security. This instability is potentially compounded by the “financialization” of commodity markets and strengthened linkages between the agricultural and energy sectors due to biofuel production. While the El-Niño-Southern-Oscillation (ENSO) is a well-known source of climate variability that affects these sectors, research on its role in driving volatility-contagions (i.e., shifts from normal patterns of volatility-relatedness) remains limited. This project investigates whether ENSO events (phases with high climate variability) trigger volatility-contagions amongst these sectors across diverse geographies.
Methodology/project summary: The study employs dynamic-network-community-detection algorithms to capture evolving relationships and contagions over time, overcoming the scalability limitations of traditional pairwise assessment methods. The analysis uses historical spot prices for a broad set of commodities (e.g., wheat, corn, crude oil, and biofuels) across key regions, including Brazil, India, and Australia.
Results: Anticipated findings are potential “contagions” where ENSO intensity alters typical commodity interdependencies. Using ML-based network analysis to examine climate-induced shifts, the study aims to analyze a broader range of commodities and geographies than previous studies, providing a holistic view of global risk transmission.
Audience: The study will help climate scientists quantitatively articulate how ENSO impacts socio-economic factors key to food and energy security. It also has significant implications for investors, policymakers, and commodity producers - informing more robust risk management, sustainable investment practices, and targeted food and energy security interventions.
Keywords: ENSO, Dynamic-Network-Analysis, Food and Energy Security, Volatility-Contagion, Commodity Markets.