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Seminario de Investigación
03/05/2023 | 1:00 PM - 3:00 PM
Pricing in Agricultural Commodity Markets Under Climate Change
Presenta | Magdalena Cornejo | UTDT
We investigate the realized effect of climate change on agricultural commodity markets. We focus on corn and soybeans in the US Midwest, which grow during the summer, and exploit the fact that yields are sensitive to weather in a nonlinear manner: yields increase with summer rain up to a certain threshold and tend to decrease beyond that. Yields also fall with high temperatures. We find that climate change has shifted the distribution of summer rain in the US Midwest to the right since the early nineties while leaving the distribution of mean regional temperatures mostly unchanged. We also find that this change in weather patterns has been reflected in the nonlinear response of corn and soybean CME returns to weather events. Our results are economically significant and suggest that weather distributions affected by climate change are being priced in agricultural commodity markets.