IDEAS home Printed from https://ideas.repec.org/a/wly/agribz/v40y2024i4p908-925.html
   My bibliography  Save this article

Sensitivity of the United States crop basis and distribution network to precipitation

Author

Listed:
  • Mohammad Hasan Mobarok
  • Wyatt Thompson
  • Theodoros Skevas

Abstract

We investigate the influence of precipitation patterns on the differences between Missouri corn and soybean elevator prices and nearby Chicago Board of Trade futures prices, also referred to as basis. Basis reflects the crop transportation network costs, and we use basis data to estimate the sensitivity of this network to precipitation. The estimates show that corn and soybean basis differ in terms of the immediate effect of weekly local precipitation. The growing‐season precipitation exhibits a U‐shaped relationship for both crops, reflecting the role of growing‐season precipitation on yields and the sensitivity of transportation system stress to crop volumes. We also find that the basis is affected by river transportation disruptions proxied by regional precipitation, which indicates when water levels might be too high or too low for normal barge traffic. Given the climate projections, there are concerns regarding precipitation's influence on the infrastructure that links Missouri crops to export facilities, crop growing conditions, and collection point disruptions. Hence, this research speaks to both the state of this part of the food system now and the potential impacts of changing weather patterns on the US crop distribution network. [EconLit Citations: Q13, L90].

Suggested Citation

  • Mohammad Hasan Mobarok & Wyatt Thompson & Theodoros Skevas, 2024. "Sensitivity of the United States crop basis and distribution network to precipitation," Agribusiness, John Wiley & Sons, Ltd., vol. 40(4), pages 908-925, October.
    • Handle: RePEc:wly:agribz:v:40:y:2024:i:4:p:908-925
    DOI: 10.1002/agr.21865
    as

    Download full text from publisher

    File URL: https://doi.org/10.1002/agr.21865
    Download Restriction: no
    File URL: https://libkey.io/10.1002/agr.21865?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    References listed on IDEAS

    as
    1. Eugene F. Fama & Kenneth R. French, 2015. "Commodity Futures Prices: Some Evidence on Forecast Power, Premiums, and the Theory of Storage," World Scientific Book Chapters, in: Anastasios G Malliaris & William T Ziemba (ed.), THE WORLD SCIENTIFIC HANDBOOK OF FUTURES MARKETS, chapter 4, pages 79-102, World Scientific Publishing Co. Pte. Ltd..
    2. Mckenzie, Andrew M. & Isbell, Bradley J. & Brorsen, B. Wade, 2019. "The Cost Of Forward Contracting In The Cif Nola Export Bid Market," Journal of Agricultural and Applied Economics, Cambridge University Press, vol. 51(1), pages 164-181, February.
    3. William Wilson & Prithviraj Lakkakula, 2021. "Secondary rail car markets for grain transportation and basis values," Agribusiness, John Wiley & Sons, Ltd., vol. 37(3), pages 472-488, July.
    4. Leroy Davis & Lowell Hill, 1974. "Spatial Price Differentials for Corn among Illinois Country Elevators," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 56(1), pages 135-144.
    5. Nicole M. Aulerich & Raymond P. H. Fishe & Jeffrey H. Harris, 2011. "Why do expiring futures and cash prices diverge for grain markets?," Journal of Futures Markets, John Wiley & Sons, Ltd., vol. 31(6), pages 503-533, June.
    6. Yunxian Yan & Michael Reed, 2014. "Price Discovery in the Chinese Corn Futures Market, With Comparisons to Soybean Futures," Agribusiness, John Wiley & Sons, Ltd., vol. 30(4), pages 398-409, September.
    7. Ruiqing Miao & Madhu Khanna & Haixiao Huang, 2016. "Responsiveness of Crop Yield and Acreage to Prices and Climate," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 98(1), pages 191-211.
    8. William W. Wilson & Bruce Dahl, 2011. "Grain pricing and transportation: dynamics and changes in markets," Agribusiness, John Wiley & Sons, Ltd., vol. 27(4), pages 420-434, September.
    9. Chad E. Hart & Frayne Olson, 2017. "Analysis of Grain Basis Behavior During Transportation Disruptions and Development of Weekly Grain Basis Indicators for the USDA Grain Transportation Report," Center for Agricultural and Rural Development (CARD) Publications 17-sr111, Center for Agricultural and Rural Development (CARD) at Iowa State University.
    10. Carlotta Penone & Elisa Giampietri & Samuele Trestini, 2022. "Futures–spot price transmission in EU corn markets," Agribusiness, John Wiley & Sons, Ltd., vol. 38(3), pages 679-709, July.
    11. Julyerme M. Tonin & Carlos M. R. Vieira & Rui M. de Sousa Fragoso & João G. Martines Filho, 2020. "Conditional correlation and volatility between spot and futures markets for soybean and corn," Agribusiness, John Wiley & Sons, Ltd., vol. 36(4), pages 707-724, October.
    12. Olivier Deschênes & Michael Greenstone, 2007. "The Economic Impacts of Climate Change: Evidence from Agricultural Output and Random Fluctuations in Weather," American Economic Review, American Economic Association, vol. 97(1), pages 354-385, March.
    13. Welch, J. Mark & Mkrtchyan, Vardan & Power, Gabriel J., 2009. "Predicting the Corn Basis in the Texas Triangle Area," Journal of Agribusiness, Agricultural Economics Association of Georgia, vol. 27(1-2), pages 1-15.
    14. Andrew M. McKenzie, 2005. "The effects of barge shocks on soybean basis levels in Arkansas: A study of market integration," Agribusiness, John Wiley & Sons, Ltd., vol. 21(1), pages 37-52.
    15. William G. Tomek, 1997. "Commodity Futures Prices as Forecasts," Review of Agricultural Economics, Agricultural and Applied Economics Association, vol. 19(1), pages 23-44.
    16. Frank Millerd, 2011. "The potential impact of climate change on Great Lakes international shipping," Climatic Change, Springer, vol. 104(3), pages 629-652, February.
    17. Getu Hailu & Alex Maynard & Alfons Weersink, 2015. "Empirical analysis of corn and soybean basis in Canada," Applied Economics, Taylor & Francis Journals, vol. 47(51), pages 5491-5509, November.
    18. Wyatt Thompson & Scott Gerlt & J. Elliott Campbell & Lara M. Kueppers & Yaqiong Lu & Mark A. Snyder, 2017. "A Cost of Tractability? Estimating Climate Change Impacts Using a Single Crop Market Understates Impacts on Market Conditions and Variability," Applied Economic Perspectives and Policy, Agricultural and Applied Economics Association, vol. 39(2), pages 346-362.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Kamrud, Gwen & Wilson, William W. & Bullock, David W., 2023. "Logistics competition between the U.S. and Brazil for soybean shipments to China: An optimized Monte Carlo simulation approach," Journal of Commodity Markets, Elsevier, vol. 31(C).
    2. William Wilson & Prithviraj Lakkakula, 2021. "Secondary rail car markets for grain transportation and basis values," Agribusiness, John Wiley & Sons, Ltd., vol. 37(3), pages 472-488, July.
    3. Adjemian, Michael K. & Marshall, Kandice K. & Hubbs, Todd & Penn, Jerrod, 2016. "Decomposing Local Prices into Hedgeable and Unhedgeable Shocks," 2016 Annual Meeting, July 31-August 2, Boston, Massachusetts 235874, Agricultural and Applied Economics Association.
    4. Guo, Kevin & Leung, Tim, 2017. "Understanding the non-convergence of agricultural futures via stochastic storage costs and timing options," Journal of Commodity Markets, Elsevier, vol. 6(C), pages 32-49.
    5. Carlotta Penone & Elisa Giampietri & Samuele Trestini, 2022. "Futures–spot price transmission in EU corn markets," Agribusiness, John Wiley & Sons, Ltd., vol. 38(3), pages 679-709, July.
    6. Abel Rodriguez & Enrique ter Horst, 2008. "Measuring expectations in options markets: An application to the SP500 index," Papers 0901.0033, arXiv.org.
    7. Xiaoguang Chen & Madhu Khanna & Lu Yang, 2022. "The impacts of temperature on Chinese food processing firms," Australian Journal of Agricultural and Resource Economics, Australian Agricultural and Resource Economics Society, vol. 66(2), pages 256-279, April.
    8. Jeffrey A Frankel & Andrew K Rose, 2010. "Determinants of Agricultural and Mineral Commodity Prices," RBA Annual Conference Volume (Discontinued), in: Renée Fry & Callum Jones & Christopher Kent (ed.),Inflation in an Era of Relative Price Shocks, Reserve Bank of Australia.
    9. repec:ags:aaea22:335522 is not listed on IDEAS
    10. Attavanich, Witsanu & McCarl, Bruce A. & Fuller, Stephen W. & Vedenov, Dmitry V. & Ahmedov, Zafarbek, 2011. "The Effect of Climate Change on Transportation Flows and Inland Waterways Due to Climate-Induced Shifts in Crop Production Patterns," 2011 Annual Meeting, July 24-26, 2011, Pittsburgh, Pennsylvania 109241, Agricultural and Applied Economics Association.
    11. Yu, Chengzheng & Miao, Ruiqing & Khanna, Madhu, 2021. "Maladaptation of U.S. Corn and Soybean Yields to a Changing Climate," 2021 Conference, August 17-31, 2021, Virtual 315037, International Association of Agricultural Economists.
    12. François Bareille & Raja Chakir, 2024. "Structural identification of weather impacts on crop yields: Disentangling agronomic from adaptation effects," American Journal of Agricultural Economics, John Wiley & Sons, vol. 106(3), pages 989-1019, May.
    13. Siaplay, Mounir & Anderson, Kim B. & Brorsen, B. Wade, 2007. "Using Basis and Futures Prices as a Barometer in Deciding Whether to Store Grain or Not," 2007 Conference, April 16-17, 2007, Chicago, Illinois 37575, NCCC-134 Conference on Applied Commodity Price Analysis, Forecasting, and Market Risk Management.
    14. Bradley Isbell & Andrew M. McKenzie & B. Wade Brorsen, 2020. "The cost of forward contracting in the Mississippi barge freight river market," Agribusiness, John Wiley & Sons, Ltd., vol. 36(2), pages 226-241, April.
    15. Karali, Berna & McNew, Kevin & Thurman, Walter N., 2018. "Price Discovery and the Basis Effects of Failures to Converge in Soft RedWinter Wheat Futures Markets," Journal of Agricultural and Resource Economics, Western Agricultural Economics Association, vol. 43(1), January.
    16. Zhige Wu & Alex Maynard & Alfons Weersink & Getu Hailu, 2018. "Asymmetric spot‐futures price adjustments in grain markets," Journal of Futures Markets, John Wiley & Sons, Ltd., vol. 38(12), pages 1549-1564, December.
    17. Etienne, Xiaoli L. & Farhangdoost, Sara & Hoffman, Linwood A. & Adam, Brian D., 2023. "Forecasting the U.S. season-average farm price of corn: Derivation of an alternative futures-based forecasting model," Journal of Commodity Markets, Elsevier, vol. 30(C).
    18. Klumpp, Joni M. & Brorsen, B. Wade & Anderson, Kim B., 2005. "The Impact of Marketing Strategy Information on the Producer's Selling Decision," 2005 Conference, April 18-19, 2005, St. Louis, Missouri 19036, NCR-134 Conference on Applied Commodity Price Analysis, Forecasting, and Market Risk Management.
    19. Cui, Xiaomeng, 2020. "Climate change and adaptation in agriculture: Evidence from US cropping patterns," Journal of Environmental Economics and Management, Elsevier, vol. 101(C).
    20. Liu, Ziheng & Lu, Qinan, 2023. "Ozone stress and crop harvesting failure: Evidence from US food production," Food Policy, Elsevier, vol. 121(C).
    21. Zhang, Tong & Brorsen, B. Wade, 2006. "Heterogeneity in Producer's Marketing Strategy," 2006 Annual Meeting, February 5-8, 2006, Orlando, Florida 35299, Southern Agricultural Economics Association.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:wly:agribz:v:40:y:2024:i:4:p:908-925. See general information about how to correct material in RePEc.

    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 CitEc recognized a bibliographic reference but did not link an item in RePEc 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 RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Wiley Content Delivery (email available below). General contact details of provider: http://onlinelibrary.wiley.com/journal/10.1002/(ISSN)1520-6297 .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.