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Response of corn markets to climate volatility under alternative energy futures


Recent price spikes1,2 have raised concern that climate change could increase food insecurity by reducing grain yields in the coming decades3,4. However, commodity price volatility is also influenced by other factors5,6, which may either exacerbate or buffer the effects of climate change. Here we show that US corn price volatility exhibits higher sensitivity to near-term climate change than to energy policy influences or agriculture–energy market integration, and that the presence of a biofuels mandate enhances the sensitivity to climate change by more than 50%. The climate change impact is driven primarily by intensification of severe hot conditions in the primary corn-growing region of the United States, which causes US corn price volatility to increase sharply in response to global warming projected to occur over the next three decades. Closer integration of agriculture and energy markets moderates the effects of climate change, unless the biofuels mandate becomes binding, in which case corn price volatility is instead exacerbated. However, in spite of the substantial impact on US corn price volatility, we find relatively small impact on food prices. Our findings highlight the critical importance of interactions between energy policies, energy–agriculture linkages and climate change.

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All prices are NET prices.

Figure 1: Standard deviation of year-on-year percentage change in US corn prices under alternative climate, policy and economic scenarios.
Figure 2: US corn yield ratios in the historic and future climate.
Figure 3: Nearest distance to equivalent temperature envelope in the future climate.


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We thank W. Schlenker for sharing his data and parameter estimates with us. We are grateful for insightful and constructive comments from participants in the International Agricultural Trade Consortium theme day and the Stanford Environmental Economics Seminar series. We thank NCEP for providing access to the NARR data set, and the PRISM Climate Group for providing access to the PRISM observational data set. We thank the Rosen Center for Advanced Computing (RCAC) at Purdue University and the Center for Computational Earth and Environmental Science (CEES) at Stanford University for access to computing resources. The research reported here was primarily supported by the US DOE, Office of Science, Office of Biological and Environmental Research, Integrated Assessment Research Program, Grant No. DE-SC005171, along with supplementary support from NSF award 0955283 and NIH award 1R01AI090159-01.

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N.S.D. designed and performed the climate modelling, designed the climate–yield–economic modelling approach, analysed the results and wrote the paper. T.W.H. designed the climate–yield–economic modelling approach, designed the economic modelling, analysed the results and wrote the paper. M.S. designed the climate–yield–economic modelling approach, performed the yield calculations and analysed the results. M.V. designed the climate–yield–economic modelling approach, performed the economic modelling, analysed the results and wrote the paper.

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Correspondence to Noah S. Diffenbaugh.

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The authors declare no competing financial interests.

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Diffenbaugh, N., Hertel, T., Scherer, M. et al. Response of corn markets to climate volatility under alternative energy futures. Nature Clim Change 2, 514–518 (2012).

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