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Will global warming affect corn price?

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Volatility on the corn market

Some recent researches suggest that even small temperature increases over the next three decades could have a huge impact on the volatility of corn price in US. Factors such as oil prices, trade policies and biofuel mandates have also been blamed for the corn price swings.

US biofuel mandates

US scientists believe that, global warming will increase the volatility of corn prices, even more than usual factors like oil prices and trade policies. Government biofuel mandates could also increase the climate change effect on the pricing of this crop.

In late 70s Corn-based biofuels were encouraged by the Energy Tax Act that has pushed US energy to renewable and more efficient sources.

Federal mandates have restrictive effect on the corn market. The growing use of biofuels has encouraged farmers to plant more corn instead of soybeans and this has lead to less soy supply and increase of prices.

Without federal regulations the market could be more flexible. For example in a normal season the corn market could distribute more of its crop to biofuel production. Alternatively, it could keep more of its harvest for food supply when the season is extremely hot. Thus the market will satisfy the demand for US’s dominant crop, and will keep prices low.

More corn fields to the North

Scientists believe that there is a strong link between global warming and corn price volatility but do not expect big impact on overall food prices. They did, however, speculate that unless farmers develop more heat-tolerant corn varieties, part of the US corn belt would migrate towards the Canadian border.

The climate debate is still more focused on whether or not fossil fuels contribute to global warming, than if rising temperatures affect corn prices.

However, more analysts believe that biofuel production could strengthen the effect of global warming on corn price volatility. Thus the market will not be able to adjust to the changes in crop yields.


prof8t's picture

Great article Toni! Keep it binary.


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