SUGAR PRICES DEVELOPMENT IN PERIOD OF COVID-19 PANDEMIC

Agricultural commodities strengthened their position on the financial and commodity market during the 21st century. At the same time, however, the agricultural-oriented commodity market has been suffering due to a high degree of price fluctuation. Significant price fluctuations are typical in this respect, especially in times of uncertainty and periods of financial market crises. In this sector, sugar belongs among key commodities. The COVID-19 pandemic has caused a significant increase in financial market uncertainty, including commodity markets. The new coronavirus affected both supply and demand on the sugar market. Such a situation resulted in significant changes in the area of production offered and especially in relation to the development of available sugar stocks. The aim of the paper is to define the impact of uncertainty on the stock market in relation to sugar price development in the period of COVID-19 crisis. The subject of the analysis is thus the development of sugar price on the one hand in the context of the financial market uncertainty and the development of the COVID-19 pandemic on the other hand. Sugar prices are represented by the S&P GSCI Sugar index, while the VIX index is used to indicate uncertainty in stock markets. To examine the changes in the relationship between sugar prices and stock market uncertainty, a regression model with a sequential Bai-Perron test of structural breaks in a thirty-year perspective is used. The results of the analysis proved the existence of a significant and negative relationship between sugar prices and the expected volatility of stock markets since the global financial crisis. Furthermore, the Granger causality test evaluates the causal relationships between sugar prices and the VIX index during the new coronavirus pandemic. The results of the analysis proved that the uncertainty in the stock market has been negatively affecting sugar prices during the COVID-19 pandemic.