The Effect of ENSO on Wheat Futures Based on EMD and GARCH Model

Abstract

At present, most of the studies on the relationship between El Nino Southern Oscillation and agricultural futures focus on perceptual analyses and directly data analysis, and these discussions are usually limited to futures price. This article uses EMD algorithm to decompose Wheat futures prices and denoised ENSO index, and finally gets the negative relationship between El Nino Southern Oscillation and wheat Futures prices. Then, this article conducts the comparative analysis of operation performance based on El Niño Southern Oscillation, finding that this mode of operation can greatly increase yields, which further explains the practical significance of ENSO. In order to explore the impact of El Nino Southern Oscillation on wheat futures yields, use classic GARCH models, transform ENSO index into virtual variables, respectively introduce them into the mean value equation and conditional variance equation. After analysis, the conclusion shows that the impact is mainly on the volatility of return rate, which reminds traders of considering risk management first.

Research on the Impact of El Nino Phenomenon on the Volatility of the U.S. Soybean Futures Price Yield

“…This study focuses on the impact of climate change on the yield of grain futures prices in commodities markets and tries to evaluate whether ENSO events have a substantial impact on the yield of soybeans futures prices [17]. In this study, we first use the yield of U.S. soybean futures prices yields to establish a GARCH-M model; we then use the GARCH-M model to estimate the yield; and finally, we compare the difference between the real and estimated yields, which is the excess yield used to examine the effect of El Nio on U.S. soybean futures prices yields.…”

“…It was discovered that U.S. soybean prices tended to rise in the second year following ENSO episodes. Liu [17] discovered that ENSO affects energy, agriculture, construction, mining, and manufacturing; ENSO events influence the overall macroeconomic changes by influencing market prices. In particular, ENSO impeded the supply of certain bulk commodities, increasing the price of agricultural bulk commodities [22].…”