Climate change and the US wheat commodity market

Vincenzo De Lipsis and Paolo Agnolucci

Journal of Economic Dynamics and Control, 2024, vol. 161, issue C

Abstract: We study the impact on the workings of the wheat commodity market of increasing weather variability, one of the direct consequences of climate change. After finding strong evidence of an increase in the variance of weather and harvest for wheat in the US, we develop a structural time series model of the commodity market to investigate the sources and consequences of this increased variability. Exploiting this model, we devise a novel empirical procedure to analyze the impact on price and the potential adjustments of the speculative demand for inventories, as predicted by the rational storage theory. We find that speculation in the physical market for wheat at annual frequency adapted to the greater uncertainty about harvest stabilizing the market price.

Keywords: Agricultural commodity market; Structural vector autoregression; Climate change; Structural change; Price volatility; Storage (search for similar items in EconPapers)
JEL-codes: C32 Q11 Q54 (search for similar items in EconPapers)
Date: 2024
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Persistent link: https://EconPapers.repec.org/RePEc:eee:dyncon:v:161:y:2024:i:c:s0165188924000150

DOI: 10.1016/j.jedc.2024.104823

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