The impact of temperature anomalies on commodity futures

Abstract

Recent evidence points to global warming and climate change as the biggest issues of the century, thus the analysis of the weather-commodity futures prices relationship has crucial importance. This paper considers the relationship between weather anomalies proxied by the Global Historical Surface Temperature Anomalies (HadCRUT4) and futures prices of agricultural products energy commodities industrial and precious metals. Analyzing the monthly data between December 1982 and November 2020 the outcomes of the novel Granger causality test suggest unidirectional causality from the temperature anomalies to commodity futures prices. The findings imply that global temperature anomalies impact the expectations about the agricultural- and energy-related economic activities including the use of commercial and organic fertilizers and fossil fuel combustion respectively.