Climate risk, conflict, and crop profitability in Somalia: implications for agrifood investment (2000–2025)

This study examines the effects of climate risk, conflict intensity, and market dynamics on the profitability of Somalia’s seven strategic crops, including maize, sorghum, cowpea, sesame, rice, banana, and lime, over the period 2000–2025 using a balanced panel of 182 crop–year observations. The study employs an integrated Panel Bayesian Vector Autoregression (Panel-BVAR) and Panel Autoregressive Distributed Lag (Panel-ARDL) framework to capture both dynamic interactions and long-run equilibrium relationships among profitability, climate conditions, conflict intensity, and market variables. The Panel-BVAR results indicate strong profitability persistence, with lagged profitability exerting a positive effect (posterior mean = 0.370), while rainfall anomaly positively influences profitability (posterior mean = 0.130). In contrast, conflict intensity exerts a negative effect (posterior mean = −0.100), confirming the adverse consequences of insecurity for agrifood investment performance. Positive effects are also observed for global commodity prices (posterior mean = 0.170) and domestic market prices (posterior mean = 0.060). The Panel-ARDL results confirm both short-run and long-run relationships, with a negative and statistically significant Error Correction Term (ECT = −0.610, p < 0.001), indicating convergence towards long-run equilibrium following short-run disturbances. Diagnostic tests confirm model stability, cointegration, residual normality, homoskedasticity, and the absence of multicollinearity and serial correlation. By integrating climate, conflict, market, and production factors within a multi-crop profitability framework, the study provides evidence that strengthening climate resilience, reducing conflict-related disruptions, improving market integration, and supporting productive agricultural expansion are essential for enhancing agrifood investment resilience and profitability in Somalia.