Climate change may create corn market price volatility, say researchers from Stanford and Purdue

America’s No. 1 crop could see its prime growing region shift to the Canadian border or its price volatility increase sharply within 30 years. A new Stanford study points to climate change as the cause.

By Rob Jordan

The study, based on economic, climatic and agricultural data and computational models, finds that even if climate change stays within the internationally recognized target limit of 3.6 degrees Fahrenheit above pre-industrial levels, the temperature changes could still make damaging heat waves much more common over the U.S. corn belt.

"Severe heat is the big hammer," Diffenbaugh said. "Even one or two degrees of global warming is likely to substantially increase heat waves that lead to low-yield years and more price volatility."

The researchers calculate that when climate change’s effects are coupled with federal mandates for biofuel production, corn price volatility could increase sharply over the period from 2020 to 2040. Increasing heat waves will lead to low-yield years, and government-mandated corn sales to ethanol producers limit the market’s ability to buffer against low-yield years.

"By limiting the ability of commodity markets to adjust to yield fluctuations, biofuels mandates work in exactly the wrong direction," said Thomas Hertel , a professor of agricultural economics at Purdue University who participated in the study.

"Our results suggest that energy policy decisions are likely to interact with climate change to affect corn price volatility, and that the market effect of a binding biofuel mandate is likely to intensify as the climate warms," Diffenbaugh said.