IDEAS home Printed from https://ideas.repec.org/p/ags/pugtwp/333245.html
   My bibliography  Save this paper

Impacts of interannual climate and biophysical variability on global agriculture markets

Author

Listed:
  • Zhao, Xin
  • Calvin, Katherine
  • Patel, Pralit
  • Abigail, Snyder
  • Wise, Marshall
  • Waldhoff, Stephanie
  • Hejazi, Mohamad
  • Edmonds, James

Abstract

Agricultural production is highly sensitive to changes in climate and weather patterns. The focus of the great majority of studies assessing climate impacts on agriculture has been on mean changes in agricultural responses. However, the manner in which global agricultural markets respond to the interannual variability of the climate and biophysical shocks is poorly understood. Here we show a strong transmission of interannual variations in climate-induced biophysical yield shocks to agriculture markets, which is magnified further by endogenous market fluctuations. We demonstrate the importance of imperfect versus perfect expectations of market and weather in generating the market fluctuations that play a key role in transferring the interannual variations to markets. We find that the volatility of market prices and consumption could be potentially reduced on average by 55% and 41%, respectively, with improved expectations, where agricultural producers make better decisions to adapt to climate and biophysical variability. We also find much heterogeneity in interannual variability across crops and regions, which is considerably mediated by trade as part of the economic response. Our study provides new insights on climate impacts on agricultural market variability and lays a foundation for further investigating the full range of climate impacts on biophysical and human systems.

Suggested Citation

  • Zhao, Xin & Calvin, Katherine & Patel, Pralit & Abigail, Snyder & Wise, Marshall & Waldhoff, Stephanie & Hejazi, Mohamad & Edmonds, James, 2021. "Impacts of interannual climate and biophysical variability on global agriculture markets," Conference papers 333245, Purdue University, Center for Global Trade Analysis, Global Trade Analysis Project.
    • Handle: RePEc:ags:pugtwp:333245
    as

    Download full text from publisher

    File URL: https://ageconsearch.umn.edu/record/333245/files/9909.pdf
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Féménia, Fabienne & Gohin, Alexandre, 2011. "Dynamic modelling of agricultural policies: The role of expectation schemes," Economic Modelling, Elsevier, vol. 28(4), pages 1950-1958, July.
    2. Noah S. Diffenbaugh & Thomas W. Hertel & Martin Scherer & Monika Verma, 2012. "Response of corn markets to climate volatility under alternative energy futures," Nature Climate Change, Nature, vol. 2(7), pages 514-518, July.
    3. Sophie Mitra & Jean‐Marc Boussard, 2012. "A simple model of endogenous agricultural commodity price fluctuations with storage," Agricultural Economics, International Association of Agricultural Economists, vol. 43(1), pages 1-15, January.
    4. Marc Nerlove, 1958. "Adaptive Expectations and Cobweb Phenomena," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 72(2), pages 227-240.
    5. A. J. Challinor & J. Watson & D. B. Lobell & S. M. Howden & D. R. Smith & N. Chhetri, 2014. "A meta-analysis of crop yield under climate change and adaptation," Nature Climate Change, Nature, vol. 4(4), pages 287-291, April.
    6. 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.
    7. Katherine Calvin & Marshall Wise & Page Kyle & Leon Clarke & Jae Edmonds, 2017. "A Hindcast Experiment Using The Gcam 3.0 Agriculture And Land-Use Module," Climate Change Economics (CCE), World Scientific Publishing Co. Pte. Ltd., vol. 8(01), pages 1-21, February.
    8. Martin Lampe & Dirk Willenbockel & Helal Ahammad & Elodie Blanc & Yongxia Cai & Katherine Calvin & Shinichiro Fujimori & Tomoko Hasegawa & Petr Havlik & Edwina Heyhoe & Page Kyle & Hermann Lotze-Campe, 2014. "Why do global long-term scenarios for agriculture differ? An overview of the AgMIP Global Economic Model Intercomparison," Agricultural Economics, International Association of Agricultural Economists, vol. 45(1), pages 3-20, January.
    9. Arnaud Costinot & Dave Donaldson & Cory Smith, 2016. "Evolving Comparative Advantage and the Impact of Climate Change in Agricultural Markets: Evidence from 1.7 Million Fields around the World," Journal of Political Economy, University of Chicago Press, vol. 124(1), pages 205-248.
    10. Chaudhry, Muhammad Imran & Miranda, Mario J., 2018. "Complex price dynamics in vertically linked cobweb markets," Economic Modelling, Elsevier, vol. 72(C), pages 363-378.
    11. Nathan P. Hendricks & Aaron Smith & Daniel A. Sumner, 2014. "Crop Supply Dynamics and the Illusion of Partial Adjustment," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 96(5), pages 1469-1491.
    12. Kiniry, James R. & Major, D. J. & Izarralde, R. C. & Williams, J. R. & Gassman, Philip W. & Morrison, M. & Bergentine, R. & Zentner, R. P., 1995. "Epic Model Parameters for Cereal, Oilseed, and Forage Crops in the Northern Great Plains Region," Staff General Research Papers Archive 894, Iowa State University, Department of Economics.
    13. Christophe Gouel, 2012. "Agricultural Price Instability: A Survey Of Competing Explanations And Remedies," Journal of Economic Surveys, Wiley Blackwell, vol. 26(1), pages 129-156, February.
    14. Chris Huntingford & Philip D. Jones & Valerie N. Livina & Timothy M. Lenton & Peter M. Cox, 2013. "No increase in global temperature variability despite changing regional patterns," Nature, Nature, vol. 500(7462), pages 327-330, August.
    15. 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 2265-2295, October.
    16. Hommes, Cars H., 1994. "Dynamics of the cobweb model with adaptive expectations and nonlinear supply and demand," Journal of Economic Behavior & Organization, Elsevier, vol. 24(3), pages 315-335, August.
    17. Deepak K. Ray & James S. Gerber & Graham K. MacDonald & Paul C. West, 2015. "Climate variation explains a third of global crop yield variability," Nature Communications, Nature, vol. 6(1), pages 1-9, May.
    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. Francisco Costa & Fabien Forge & Jason Garred & João Paulo Pessoa, 2023. "The Impact of Climate Change on Risk and Return in Indian Agriculture," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 85(1), pages 1-27, May.
    2. Chaudhry, Muhammad Imran & Katchova, Ani & Miranda, Mario Javier, 2016. "Examining pricing mechanics in the poultry value chain - empirical evidence from Pakistan," 2016 Annual Meeting, July 31-August 2, Boston, Massachusetts 235953, Agricultural and Applied Economics Association.
    3. Chaudhry, Muhammad Imran & Miranda, Mario J., 2018. "Complex price dynamics in vertically linked cobweb markets," Economic Modelling, Elsevier, vol. 72(C), pages 363-378.
    4. Francisco Costa & Fabien Forge & Jason Garred & João Paulo Pessoa, 2020. "Climate Change and the Distribution of Agricultural Output," Working Papers 2003E, University of Ottawa, Department of Economics.
    5. Cui, Xiaomeng, 2020. "Climate change and adaptation in agriculture: Evidence from US cropping patterns," Journal of Environmental Economics and Management, Elsevier, vol. 101(C).
    6. Tran, A. Nam & Welch, Jarrod R. & Lobell, David & Roberts, Michael J. & Schlenker, Wolfram, 2012. "Commodity Prices and Volatility in Response to Anticipated Climate Change," 2012 Annual Meeting, August 12-14, 2012, Seattle, Washington 124827, Agricultural and Applied Economics Association.
    7. Nakelse, Tebila & Dalton, Timothy J. & Hendricks, Nathan P. & Hodjo, Manzamasso, 2018. "Are smallholder farmers better or worse off from an increase in the international price of cereals?," Food Policy, Elsevier, vol. 79(C), pages 213-223.
    8. Marcel Adenäuer & Clara Frezal & Thomas Chatzopoulos, 2023. "Mitigating the impact of extreme weather events on agricultural markets through trade," OECD Food, Agriculture and Fisheries Papers 198, OECD Publishing.
    9. Christophe Gouel, 2012. "Agricultural Price Instability: A Survey Of Competing Explanations And Remedies," Journal of Economic Surveys, Wiley Blackwell, vol. 26(1), pages 129-156, February.
    10. Cui, Xiaomeng & Zhong, Zheng, 2024. "Climate change, cropland adjustments, and food security: Evidence from China," Journal of Development Economics, Elsevier, vol. 167(C).
    11. Thomas Barré, 2011. "Price expectations and price dynamics: the case of the rice sector in developing Asia," Working Papers hal-00630711, HAL.
    12. Cui, X., 2018. "Adaptation to Climate Change: Evidence from US Acreage Response," 2018 Conference, July 28-August 2, 2018, Vancouver, British Columbia 277094, International Association of Agricultural Economists.
    13. Gouel, Christophe & Laborde, David, 2021. "The crucial role of domestic and international market-mediated adaptation to climate change," Journal of Environmental Economics and Management, Elsevier, vol. 106(C).
    14. Thomas Barré, 2011. "Price expectations and price dynamics: the case of the rice sector in developing Asia," Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers) hal-00630711, HAL.
    15. Stefan Wimmer & Christian Stetter & Jonas Schmitt & Robert Finger, 2024. "Farm‐level responses to weather trends: A structural model," American Journal of Agricultural Economics, John Wiley & Sons, vol. 106(3), pages 1241-1273, May.
    16. Fausto, Cavalli, 2016. "A cobweb model with alternating demand and supply functions," Working Papers 325, University of Milano-Bicocca, Department of Economics, revised 07 Feb 2016.
    17. CARPENTIER, Alain & GOHIN, Alexandre & SCKOKAI, Paolo & THOMAS, Alban, 2015. "Economic modelling of agricultural production: past advances and new challenges," Review of Agricultural and Environmental Studies - Revue d'Etudes en Agriculture et Environnement (RAEStud), Institut National de la Recherche Agronomique (INRA), vol. 96(1), March.
    18. Cees Diks & Cars Hommes & Valentyn Panchenko & Roy Weide, 2008. "E&F Chaos: A User Friendly Software Package for Nonlinear Economic Dynamics," Computational Economics, Springer;Society for Computational Economics, vol. 32(1), pages 221-244, September.
    19. Porteous, Obie C., 2015. "High Trade Costs and Their Consequences: An Estimated Model of African Agricultural Storage and Trade," 2015 AAEA & WAEA Joint Annual Meeting, July 26-28, San Francisco, California 205776, Agricultural and Applied Economics Association.
    20. Hendricks, Nathan P. & Smith, Aaron D. & Villoria, Nelson B., 2018. "Global Agricultural Supply Response to Persistent Price Shocks," 2018 Annual Meeting, August 5-7, Washington, D.C. 274338, Agricultural and Applied Economics Association.

    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:ags:pugtwp:333245. 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: AgEcon Search (email available below). General contact details of provider: https://edirc.repec.org/data/gtpurus.html .

    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.