Climate Change and Grain Price Volatility: Empirical Evidence for Corn and Wheat 1971–2019

Marie Steen, Olvar Bergland () and Ole Gjølberg
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Marie Steen: School of Economics and Business, Norwegian University of Life Sciences, 1433 Ås, Norway
Olvar Bergland: School of Economics and Business, Norwegian University of Life Sciences, 1433 Ås, Norway
Ole Gjølberg: School of Economics and Business, Norwegian University of Life Sciences, 1433 Ås, Norway

Commodities, 2023, vol. 2, issue 1, 1-12

Abstract: It is widely recognized that climate change makes the weather more erratic. As the combination of temperature and precipitation is a major driver of grain crop productivity, more frequent extreme rainfalls and heat waves, flooding and drought tend to make grain production and hence grain prices more volatile. We analyze daily prices during the growing season for corn and wheat over the period 1971–2019 using an EGARCH model. There have been occasional spikes in price volatility throughout this period. We do not, however, find that grain prices have become more volatile since the 1970s, with an exception for a small but statistically significant upward trend in wheat price volatility. To the extent that climate change has caused more frequent weather extremes affecting crop yields, it appears that the price effects have been softened, most likely through farmers’ adaption to climate changes, introduction of more stress-tolerant hybrids, storage, regional and international trade and risk management instruments.

Keywords: climate change; volatility; agricultural production; prices; futures (search for similar items in EconPapers)
JEL-codes: C0 C1 C2 C3 C4 C5 C6 C7 C8 C9 D4 E3 E6 F0 F1 F3 F4 F5 F6 G1 O1 O5 Q1 Q2 Q4 (search for similar items in EconPapers)
Date: 2023
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Citations: View citations in EconPapers (1)

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