Climate variation and corn price volatility : a partial equilibrium model

Abstract

Projected future climate changes in the US Corn Belt provides motivation to study how these changes will affect the volatility of crop prices. Recent publications focused on how these changes in climate and climate variability affect the volatility of crop prices and yields, but we are aware of no research that focuses on how the changing of climate variability alone will affect the volatility of yields and area, as well as the market consequences. Considering these indicators, past publications do not account for the timing and intensity of weather variables when estimating the price impacts of climate driven changes to yields and area. This study builds on the previous literature to estimate how the timing of specific weather variables, important to corn yields and area, will affect the volatility of corn prices. The study finds that, under future climate scenarios, corn price volatility could increase, causing a potential change in producer receipts and a potential increase in government costs.