Effects of climate change on maize prize volatility in South Africa: evidence from a Garch model

Climate change needs to be taken seriously as it directly impacts the supply of food and living standards of billions of people. It is increasingly being recognised as a global phenomenon with the possibility of having far-reaching implications on poverty and food security. Volatility in the price of the staple crop upshots food insecurity. This study used secondary time series data, for the period 1960 to 2018 to assess the effect of climate change on maize price volatility in South Africa. Rainfall and temperature were used as proxies for climate change. The effect of climate change on maize price volatility was estimated using the Generalized Autoregressive Conditional Heteroscedasticity (GARCH) model. The GARCH analysis found that temperature exerts a significant positive influence on maize price volatility, whereas rainfall had a significant negative impact on maize prices. The study concluded that the volatility in maize prices is affected by changes in temperature. When temperature increases significantly, it results in yield reduction thus creating commodity shortages and in turn create volatility in maize prices. On the other hand, the study concluded that when rainfall increase significantly, there will be an increase in production thus pushing maize prices down. The study recommends that the government invest and finance improvement in irrigation infrastructure and groundwater harnessing so as to increase maize production. This will improve the welfare of the general population through lower priced, thus addressing food security.