Trade Can Buffer Climate-Induced Risks and Volatilities in Crop Supply
Corn, a staple crop for billions, is particularly vulnerable to heat stress, a primary driver of yield variability.
Image credit: “anaterate” for Pixabay (https://pixabay.com/photos/corn-harvest-combine-harvester-5596982/)
Climate change poses increasing threat to global corn production. Extreme temperatures, caused by climate change, can reduce corn yields, creating concerns around price instability and food security. While expanding irrigation may help, it can also create sustainability challenges. In contrast, international trade offers the possibility to reduce risks and stabilize global corn supply. This research seeks to explore how effective trade is in mitigating supply volatility under climate change, an area that has received less attention compared to studies on average yield impacts. This study uses a three-step approach to analyze future corn yield volatility and risks due to climate change. It first develops a statistical model to estimate how corn yields respond to heat stress, then applies this model to future climate data (NEX-GDDP-CMIP6) to project yield fluctuations and risks via regional probability density functions. Finally, it analyzes the potential benefits of irrigation and market integration in mitigating these risks by quantifying the risks with three key metrics: Sigma (σ) to capture volatility, Rho (ρ) for the risk of substantial loss, and Beta (β) to measure relative volatility.
This study assesses the future risks and volatility in global corn supply due to climate change, focusing on irrigation and market integration as key adaptation strategies. It argues that while irrigation can help farmers mitigate climate impacts, large-scale expansion risks depleting groundwater resources. In contrast, market integration, by facilitating trade between regions with varying climates, offers a more sustainable solution by reducing food market volatility and preserving water resources. The study emphasizes the need for a multidimensional approach to climate adaptation, balancing economic and environmental concerns to ensure global food security.
Climate change is intensifying the frequency and severity of extreme events, posing challenges to food security. Corn, a staple crop for billions, is particularly vulnerable to heat stress, a primary driver of yield variability. While many studies have examined climate impact on average corn yields, little attention has been given to the climate impact on production volatility. This study investigates the future volatility and risks associated with global corn supply under climate change, evaluating the potential benefits of two key adaptation strategies: irrigation and market integration. A statistical model is employed to estimate corn yield response to heat stress while using NEX-GDDP-CMIP6 climate data to project future production volatility and risks of substantial yield losses. Three metrics are introduced to quantify these risks: Sigma (σ), the standard deviation of year-on-year yield change, which reflects overall yield volatility; Rho (ρ), the risk of substantial loss, defined as the probability of yield falling below a critical threshold; and Beta (β), a relative risk coefficient that captures the volatility of a region's corn production compared to the globally integrated market. The analysis reveals a concerning trend of increasing year-on-year yield volatility (σ) across most regions and climate models. This volatility increase is significant for key corn-producing regions like Brazil and the United States. While irrigated corn production exhibits a smaller rise in volatility, suggesting irrigation as a potential buffer against climate change impacts, it is not a sustainable option as it can cause groundwater depletion. On the other hand, global market integration reduces overall volatility and market risks significantly with less sustainability concerns. These findings highlight the importance of a multidimensional approach to adaptation in the food sector. While irrigation can benefit individual farmers, promoting global market integration offers a broader solution for fostering resilience and sustainability across the entire food system.