Causal and time-frequency spillovers from the Southern Oscillation index to grain futures: Evidence from CBOT Corn and Soybean futures and SAFEX Maize

Overview

This study investigates the causal and time-frequency transmission mechanisms between the Southern Oscillation Index (SOI), an ENSO-linked climate indicator, and grain futures price dynamics across multiple markets and temporal scales. The analysis encompasses CBOT corn and soybean futures alongside SAFEX maize futures, employing a multimethod framework that integrates wavelet-based spectral analysis with Granger causality testing and quantile regression approaches. The research explicitly accounts for macrofinancial confounders to isolate climate-specific spillover effects from general market comovement patterns.

Methods and approach

The analytical framework combines partial wavelet coherence analysis, multi-scale wavelet decomposition, Granger causality testing, and wavelet quantile regression to characterize SOI spillovers across frequency bands and time horizons. The methodology controls for macrofinancial variables to establish climate-specific transmission channels distinct from broader market dynamics. Both 30-day and 90-day moving average SOI aggregates are constructed and tested for predictive capacity over futures returns and conditional volatility. The scale-dependent approach permits identification of horizon-specific climate sensitivity, distinguishing short-term price responses from medium- and long-term market adjustments.

Key Findings

SAFEX maize exhibits pronounced scale-dependent SOI spillovers with dynamic comovement intensifying at medium- to long-term frequency bands. Both 30-day and 90-day SOI aggregates demonstrate statistically significant forecasting power for SAFEX maize returns and volatility across multiple temporal horizons. In contrast, CBOT corn and soybean futures display markedly weaker sensitivity to SOI signals, with climate spillovers manifesting episodically rather than persistently. The differential regional vulnerability suggests that southern African grain markets experience more pronounced ENSO-related climate transmission relative to North American commodity futures.

Implications

The identification of SOI-based early warning signals for grain futures volatility carries implications for risk management frameworks in commodity markets exhibiting elevated climate sensitivity. SAFEX maize futures demonstrate utility as a climate-responsive market instrument, where SOI aggregates provide actionable predictive signals for hedging and portfolio positioning. The asymmetric regional climate vulnerability evidenced across markets suggests that commodity price stabilization mechanisms must account for geographically differentiated ENSO transmission pathways rather than applying uniform climate-commodity linkage assumptions.

Scope and limitations

This summary is based on the study abstract and available metadata. It does not include a full analysis of the complete paper, supplementary materials, or underlying datasets unless explicitly stated. Findings should be interpreted in the context of the original publication.