The long-term trend isn’t good: crop prices tend to follow a downward price trend after a big spike like last summer’s.
But another trend might start giving producers more spikes to take advantage of, says agricultural economist Alex McCalla.
“All the weather models I’ve seen … have a common theme: you’re going to have increasing severity of weather and frequency of weather events,” said McCalla after a presentation at the Canadian Wheat Board’s Grain World conference in Winnipeg.
Climate change won’t help farmers produce better crops but it should make markets more twitchy and cause more slumps in world stocks, which are often the precursor to major price spikes, McCalla said.
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“If you have more (weather problems) of bigger amplitude, the implications for food stocks and food security are much larger,” said McCalla, who works for the University of California.
He and Brian Oleson of the University of Manitoba examined 20th century commodity market history to look for trends.
McCalla noted the major price spikes of 1910-14, 1972-74 and 2008, then pointed out that after the first two spikes, crop prices returned to the long-running downward trend in real crop prices that has continued since the late 19th century. (Real prices factor in inflation.)
Smaller spikes have also occurred in 1982, 1988, 1996 and the early 2000s, all also leading to a return to the downward trend.
One difference that would benefit farmers who manage to produce a crop is that climate change will shrink the gaps between spikes, which often occur only once every decade or two.
More spikes mean more opportunities to get good prices, McCalla said. With world stocks-to-use ratios tight by historical standards, farmers may not be that far from price recoveries.
“Significant changes in supply drive big changes in prices.”
But McCalla added that he had no idea when any new spike will occur.
