The Long-Term Volatility Spillovers Between Egg and Feed Wheat Prices During the COVID-19 Pandemic in Turkey

Abstract

Having spread all over the world and become effective in a very short period, COVID-19 has brought about negative effects on food supply and demand by breaking all supply chains. This study aims to determine the long-term volatility spillovers between egg and feed wheat markets in Turkey by using an exchange rate and COVID-19 as exogenous variables as well as to investigate whether these spillovers are asymmetric. The daily market data between 2010:01 and 2022:03 and the Asymmetric BEKK-GARCH (1, 1) model were used for the study . We determined that the conditional variances of egg and feed wheat return series are positively affected by both their shocks in the short run and their uncertainties in the long run. The conditional variances of egg and feed wheat return series were observed to have been positively affected by the uncertainties arising from the exchange rate in the long run, while they were negatively affected by the volatility caused by COVID-19. The depreciation of the Turkish Lira caused a reciprocating increase in the price levels of imported products, such as oil and derivatives, and of feed products which constitute a very important part of egg production costs. The increase in egg production costs, in return, consistently triggered egg prices upwards (with positive returns), causing an increase in uncertainty in the long run. This research provides a perspective for developing policy recommendations for food security if global food supply chains are broken due to any pandemic or a similar crisis (such as the Russia-Ukraine war).