Connectedness of Agricultural Commodities Under Climate Stress: Evidence from a TVP-VAR Approach

Agricultural markets are increasingly exposed to global risks as climate change intensifies and macro-financial volatility becomes more prevalent. This study examines the dynamic interconnection between major agricultural commodities—soybeans, corn, wheat, rough rice, and sugar—and key uncertainty indicators, including climate policy uncertainty, global economic policy uncertainty, geopolitical risk, financial market volatility, oil price volatility, and the U.S. Dollar Index. Using a Time-Varying Parameter Vector Autoregressive (TVP-VAR) model with monthly data, we assess both internal spillovers within the commodity system and external spillovers from macro-level uncertainties. On average, the external shock from the VIX to corn reaches 12.4%, and the spillover from RGEPU to wheat exceeds 10%, while internal links like corn to wheat remain below 8%. The results show that external uncertainty consistently dominates the connectedness structure, particularly during periods of geopolitical or financial stress, while internal interactions remain relatively subdued. Unexpectedly, recent global disruptions such as the COVID-19 pandemic and the Russia–Ukraine conflict do not exhibit strong or persistent effects on the connectedness patterns, likely due to model smoothing, stockpiling policies, and supply chain adaptations. These findings highlight the importance of strengthening international macro-financial and climate policy coordination to mitigate the propagation of external shocks. By distinguishing between internal and external connectedness under climate stress, this study contributes new insights into how systemic risks affect agri-food systems and offers a methodological framework for future risk monitoring.