The Russia-Ukraine war, beginning February 24, 2022, significantly disrupted global supply chains, exacerbating existing challenges from the COVID-19 pandemic. Russia and Ukraine's crucial roles in the international food market, particularly wheat exports (Russia ranking first or second from 2014-2020), caused immediate and widespread consequences. South Korea, heavily reliant on imports (60-70% of its food supply), experienced a surge in essential commodity prices due to import disruptions. Between January 2021 and January 2022, South Korean imports from Russia increased by 102%, reaching $2.01 billion. The war's economic implications, specifically its effects on South Korea's F&B sector stock market, are the focus of this study. Previous literature has examined various factors influencing economic growth, but there's a research gap regarding the war's impact on South Korea's F&B sector. This paper uses the KOSDAQ F&B sector index and daily stock market returns from January 1999 to October 2022 to address this gap, providing insights for investors and policymakers.

The existing literature extensively covers various factors influencing a country's economic growth, including company characteristics, macroeconomic variables, and government policies. However, this research focuses specifically on the unique impact of the Russia-Ukraine war on the South Korean F&B sector, an area not yet thoroughly explored empirically. The study differentiates itself from prior work by providing new evidence on the implications of the war for a particular sector, using the South Korean F&B industry as a case study. The study bridges this research gap by analyzing the impact of the war, providing insights for informed investment decisions and strategic policy development.

The study employs univariate time series forecasting using the Autoregressive Integrated Moving Average (ARIMA) model, a suitable choice for modeling and forecasting stock prices. The dataset comprises daily stock returns (%) of the KOSDAQ F&B industry from January 1999 to October 2022, sourced from the DataGuide database. Before applying the ARIMA model, the stationarity of the time series was checked using the Kwiatkowski-Phillips-Schmidt-Shin (KPSS) test. The partial autocorrelation function (PACF) and autocorrelation function (ACF) charts were used to determine the ARIMA model's parameters (p, d, q). The Akaike information criterion (AIC) and Schwarz information criterion (SIC) were used to identify the best-fitting model. The data were divided into training (70%) and testing (30%) sets. Model performance was evaluated using metrics such as Root Mean Squared Error (RMSE), Mean Absolute Error (MAE), and Mean Absolute Percentage Error (MAPE). A baseline regression model was also developed for comparative analysis. The ARIMA model produced an RMSE of 0.012.

The ARIMA (2,2,3) model, selected based on AIC and SIC, demonstrated good predictive performance with an RMSE of 0.012. The analysis revealed a negative trend in F&B sector returns during the period following the intensification of the Russia-Ukraine conflict. This suggests a decline in sector stock returns as the war progressed. The study also examined the net sales of the F&B industry in South Korea, finding a positive trend. However, monthly stock returns exhibited a notable downward trend in February 2022, coinciding with the start of the war. Descriptive statistics showed a positive mean return, high volatility (standard deviation of 1.8863), negative skewness (-0.3847), and high kurtosis (4.9737), indicating the F&B sector's risk profile. The regression model showed higher error metrics than the ARIMA model.

The findings confirm the negative impact of the Russia-Ukraine war on South Korea's F&B sector stock market. The observed decline in stock returns reflects the disruption of global supply chains and the increased cost of imported food commodities. South Korea's significant reliance on imports makes its F&B sector particularly vulnerable to geopolitical instability. The results highlight the need for South Korea to focus on food security and enhance its domestic agribusiness capacity to mitigate future risks. The positive trend in net sales indicates growth potential in the sector, however, this potential is currently constrained by external factors. These findings are crucial for investors to manage their portfolios strategically and for policymakers to devise effective measures to bolster the F&B sector.

The study concludes that the Russia-Ukraine war significantly impacted the South Korean F&B sector, leading to a decline in stock returns. South Korea's dependence on imported food underscores the need for policy interventions focusing on domestic agribusiness development and self-sufficiency. Future research should broaden the scope to encompass other countries and explore the combined impact of the war and rising energy prices on global food security.

The study's analysis is limited to the South Korean F&B sector and the impact of the Russia-Ukraine conflict. Data scarcity restricts a more comprehensive examination of the food supply chain's broader vulnerabilities. Future research could benefit from incorporating other relevant factors like energy prices and analyzing data from other countries.