The Impact of El Niño-Southern Oscillation Events on Price Volatility: The Case of South African Maize

This study examines how ENSO episodes affect maize price volatility transmission between the United States and South Africa. Using daily price data, from 1997 to 2024, for U.S. corn and South African white and yellow maize futures, the study employs GARCH models augmented with ENSO phase indicators and the Southern Oscillation Index (SOI) to determine volatility spillovers. The results show that South African maize prices respond to lagged US corn prices and exchange rate fluctuations, with price volatility of both white and yellow maize prices being more persistent during El Niño and La Niña events. This study integrates climate variability indicators, specifically different ENSO phases and the SOI, to investigate climate-driven volatility transmission between developed and emerging markets. Significant results were obtained when the Southern Oscillation Index was added in the volatility equations. Not only does the inclusion of ENSO indicators and SOI enhance the explanatory power of GARCH models beyond existing studies, it also provides evidence of climate-driven volatility spillovers between a developed and developing market. These findings highlight the role of climate variability in agricultural market dynamics and stress the need for proactive risk management strategies such as buffer stocks and climate responsive financial instruments to ensure food security and market resilience in Southern Africa.