The Nonparametric Relationship between Oil and South African Agricultural Prices

The aim of this paper is to investigate the causal relationship between agricultural prices in South Africa and global oil prices. A nonlinear Granger causality test based on moment conditions, introduced by Nishiyama et al (2011) is employed and we find that there is indeed a causal relationship between global oil prices and certain South African agricultural commodity prices. The mean price of wheat, sunflower and soya are Granger caused by OPEC basket oil price. OPEC basket oil prices also cause volatility of wheat, sunflower seed and sorghum prices.