Response of Corn Markets to Climate Volatility Under Alternative Energy Futures


Recent price spikes have raised concerns that climate change could increase food insecurity by reducing grain yields in coming decades. However, commodity price volatility is also influenced by other factors, which may either exacerbate or buffer the effects of climate change. DOE-funded research reveals that U.S. 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 U.S. 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 exacerbated. Despite the substantial impact on U.S. corn price volatility, the researchers observed a relatively small impact on food prices. Overall, results suggest that energy markets and associated policy decisions could substantially exacerbate the impacts of climate change, even for the relatively modest levels of global warming that are likely to occur over the near-term decades.


Diffenbaugh, N. S., T. W. Hertel, M. Scherer, and M. Verma. 2012. “Response of Corn Markets to Climate Volatility Under Alternative Energy Futures,” Nature Climate Change, DOI: 10.1038/NCLIMATE1491.