Do internal and external risk spillovers of the food system matter for national food security?

The COVID-19 pandemic and the Russia-Ukraine war raise concerns about food security, particularly in interconnected and vulnerable food systems. However, existing literature focuses mainly on food supply-chain linkages and less on systemic risk spillovers, namely system-wide risk contagion among food companies. We estimate countries' internal and external risk spillovers using the “Vector Auto-Regressive (VAR) for Value-at-Risk (VaR)” approach with an Elastic Net penalty and the stock returns of 528 food companies, and analyze their impacts on national food security using country-level panel data. Results reveal that both risk spillovers significantly threaten food security, especially for countries with low food self-sufficiency and high import concentration levels. Beyond non-financial channels like higher food consumer prices, fewer food imports, and lower food quality, these impacts also rely on financial channels (reduced credit flows to agriculture). Our study highlights enhancing food security for governments by monitoring and reducing risk contagion among food companies.