Climate change and the US wheat commodity market
Climate change and the US wheat commodity market
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.
Agricultural commodity market, Climate change, Price volatility, Storage, Structural change, Structural vector autoregression
De Lipsis, Vincenzo
92ad4463-49f5-412e-b0fc-0a4497767dbe
Agnolucci, Paolo
2b9a09fe-bc65-4377-8c00-a1505abe1978
21 February 2024
De Lipsis, Vincenzo
92ad4463-49f5-412e-b0fc-0a4497767dbe
Agnolucci, Paolo
2b9a09fe-bc65-4377-8c00-a1505abe1978
De Lipsis, Vincenzo and Agnolucci, Paolo
(2024)
Climate change and the US wheat commodity market.
Journal of Economic Dynamics and Control, 161, [104823].
(doi:10.1016/j.jedc.2024.104823).
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.
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Accepted/In Press date: 24 January 2024
e-pub ahead of print date: 7 February 2024
Published date: 21 February 2024
Keywords:
Agricultural commodity market, Climate change, Price volatility, Storage, Structural change, Structural vector autoregression
Identifiers
Local EPrints ID: 487602
URI: http://eprints.soton.ac.uk/id/eprint/487602
ISSN: 0165-1889
PURE UUID: 621903af-3fdf-469a-8b33-f5831e3212f8
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Date deposited: 28 Feb 2024 17:52
Last modified: 18 Mar 2024 04:04
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Author:
Paolo Agnolucci
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