Commodity Prices and Volatility in Response to Anticipated Climate Change
Mounting evidence indicates climate change will adversely influence agricultural crop yields and cause greater year-to-year variability. This paper considers how a rational, forward-looking and competitive commodity market would account for these anticipated changes and thereby influence time path of storage, prices, price volatility, and social welfare. We forecast 1600 hypothetical yield paths from 2000 to 2080 using estimates from a recent global statistical analysis of weather and crop yields combined with projections from 16 climate models. We then extend the dynamic competitive storage model to account for land response to price and anticipated yield shift. We simulate 1600 stochastic-equilibrium price paths under climate change relative to a baseline of stable prices using our hypothetical yield paths together with estimated demand and supply elasticities and storage cost from the literature. Our results indicate that, under the impact of climate change, world crop price level will increase twofold and world crop price volatility will increase fivefold between 2000 and 2080. Welfare analysis suggests that by 2020, the world would have welfare loss equivalent to food for 180 to 200 million people annually.
|Date of creation:||2012|
|Date of revision:|
|Contact details of provider:|| Postal: 555 East Wells Street, Suite 1100, Milwaukee, Wisconsin 53202|
Phone: (414) 918-3190
Fax: (414) 276-3349
Web page: http://www.aaea.org
More information through EDIRC
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Lutz Kilian & Bruce Hicks, 2013.
"Did Unexpectedly Strong Economic Growth Cause the Oil Price Shock of 2003–2008?,"
Journal of Forecasting,
John Wiley & Sons, Ltd., vol. 32(5), pages 385-394, 08.
- Hicks, Bruce & Kilian, Lutz, 2009. "Did Unexpectedly Strong Economic Growth Cause the Oil Price Shock of 2003-2008?," CEPR Discussion Papers 7265, C.E.P.R. Discussion Papers.
- Paul A. Samuelson, 1972. "Rejoinder," The Quarterly Journal of Economics, Oxford University Press, vol. 86(3), pages 500-503.
- Christophe Gouel & Nicolas Legrand, 2015.
"Estimating the Competitive Storage Model with Trending Commodity Prices,"
FOODSECURE Technical papers
6, LEI Wageningen UR.
- Christophe Gouel & Nicolas Legrand, 2015. "Estimating the Competitive Storage Model with Trending Commodity Prices," EconomiX Working Papers 2015-15, University of Paris West - Nanterre la Défense, EconomiX.
- Gouel, Christophe & LEgrand, Nicolas, 2015. "Estimating the Competitive Storage Model with Trending Commodity Prices," 2015 Conference, August 9-14, 2015, Milan, Italy 211688, International Association of Agricultural Economists.
- Christophe Gouel & Nicolas Legrand, 2015. "Estimating the competitive storage model with trending commodity prices," Working Papers 1513, Chaire Economie du Climat.
- Paul A. Samuelson, 1972. "The Consumer Does Benefit from Feasible Price Stability," The Quarterly Journal of Economics, Oxford University Press, vol. 86(3), pages 476-493.
- Michael J. Roberts & Wolfram Schlenker, 2013.
"Identifying Supply and Demand Elasticities of Agricultural Commodities: Implications for the US Ethanol Mandate,"
American Economic Review,
American Economic Association, vol. 103(6), pages 2265-95, October.
- Michael J. Roberts & Wolfram Schlenker, 2010. "Identifying Supply and Demand Elasticities of Agricultural Commodities: Implications for the US Ethanol Mandate," NBER Working Papers 15921, National Bureau of Economic Research, Inc.
- Abbott, Philip C. & Hurt, Christopher & Tyner, Wallace E., 2011. "What’s Driving Food Prices in 2011?," Issue Reports 112927, Farm Foundation.
- José A. Scheinkman & Jack Schechtman, 1983. "A Simple Competitive Model with Production and Storage," Review of Economic Studies, Oxford University Press, vol. 50(3), pages 427-441.
- Brennan, Donna & Williams, Jeffrey & Wright, Brian D, 1997. "Convenience Yield without the Convenience: A Spatial-Temporal Interpretation of Storage under Backwardation," Economic Journal, Royal Economic Society, vol. 107(443), pages 1009-22, July.
- Angus Deaton & Guy Laroque, 1990.
"On The Behavior of Commodity Prices,"
NBER Working Papers
3439, National Bureau of Economic Research, Inc.
- Trostle, Ronald, 2008. "Factors Contributing to Recent Increases in Food Commodity Prices (PowerPoint)," Seminars 43902, USDA Economists Group.
- Cafiero, Carlo & Bobenrieth H., Eugenio S.A. & Bobenrieth H., Juan R.A. & Wright, Brian D., 2011. "The empirical relevance of the competitive storage model," Journal of Econometrics, Elsevier, vol. 162(1), pages 44-54, May.
- Benton F. Massell, 1969. "Price Stabilization and Welfare," The Quarterly Journal of Economics, Oxford University Press, vol. 83(2), pages 284-298.
- Deaton, Angus & Laroque, Guy, 1996. "Competitive Storage and Commodity Price Dynamics," Journal of Political Economy, University of Chicago Press, vol. 104(5), pages 896-923, October.
- Williams,Jeffrey C. & Wright,Brian D., 1991.
"Storage and Commodity Markets,"
Cambridge University Press, number 9780521326162, December.
- Daniel Urban & Michael Roberts & Wolfram Schlenker & David Lobell, 2012. "Projected temperature changes indicate significant increase in interannual variability of U.S. maize yields," Climatic Change, Springer, vol. 112(2), pages 525-533, May.
- Gustafson, Robert L., 1958. "Carryover levels for grains: A method for determining amounts that are optimal under specified conditions," Technical Bulletins 157231, United States Department of Agriculture, Economic Research Service.
When requesting a correction, please mention this item's handle: RePEc:ags:aaea12:124827. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (AgEcon Search)
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.