Response of corn markets to climate volatility under alternative energy futures

Abstract

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 US, which causes US corn price volatility to increase sharply in response to global warming projected 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.

Systems integration for global sustainability

“…Rising demand for ethanol feedstocks bid up food price (67), which has major implications for food security (68). And, questions have been raised about the adverse interplay between biofuel mandates and increased interannual variability in crop production anticipated under future climate change (69). Water also comes into play, as limits on the future availability of water for irrigated agriculture will shift the location of cropland conversion owing to biofuel expansion toward regions with carbon-rich rainfed agriculture.…”

Landowners' perceptions of risk in grassland management: woody plant encroachment and prescribed fire

“…Mean annual precipitation for the area is 889 to1016 mm (National Climatic Data Center 2008), although precipitation can vary widely between and within years. In recent years, increasing demand for corn and soybeans for biofuel markets and high grain prices converged with expiring 10-to-20-year Conservation Reserve Program contracts, resulting in many grasslands converted to row-crop production (Diffenbaugh et al 2012). An additional region-wide phenomenon is an increase in nontraditional,-typically nonresident and often recreational-landowners who frequently remove lands from production altogether (Duffy andSmith 2008, Morton et al 2010).…”

Reclamation of Mined Land With Switchgrass, Miscanthus, and Arundo for Biofuel Production

“…The growth of the corn-based ethanol industry has placed added pressure on conventional crop lands and rising agricultural commodity prices will create an opportunity for states like West Virginia who have large areas of reclaimed land (Diffenbaugh et al, 2012). Compared to traditional food crops, plants used for biomass are low-value, require several years to establish, and therefore they are unlikely to compete economically with corn and soybeans on conventional agricultural lands (Walsh et al, 2003).…”