Automatic Responses of Crop Stocks and Policies Buffer Climate Change Effects on Crop Markets and Price Volatility

Climate change has the potential to affect crop prices and price volatility. However, the economic models used in prior assessments largely do not include known, automatic, stabilizing factors. Crop storage can stabilize prices and U.S. crop policy tends to provide support that moves opposite prices. We quantify effects of circa 2050 climate forcing on the inter-annual variability of U.S. Corn Belt corn and soybean yields using statistical crop models and climate scenarios from regional and global climate models. Climate change generally reduces mean yields and increases the inter-annual variability of yields in the Midwestern U.S. Using these yield impacts and an economic model with automatic market stabilizers, we find only modest increases in price volatility. Although individual producers and states are negatively affected by the yield reductions, the aggregate effect for all corn and soybean producer returns can be positive because of price increases. Moreover, agricultural policies based on price levels or revenue variation offset some of the impacts of market variation on farm income. Our results differ from other recent results and temper concerns that increasing climate instability necessarily translates to greater uncertainty about agricultural commodity uses, including as food and biofuels, in the near future.