As any farmer knows, the weather can be the making or ruination of a crop. In particular, droughts and extreme heat spells are bad for cereal crops and can lead to major price spikes, as seen in 2007/8 and 2010/11, when world wheat prices went up by more than 100% and more than 50%, respectively, in a matter of months.

These extreme spikes have been linked to humanitarian crises and food riots in developing countries. So what kind of policies could help to improve food security? To answer that question we need to understand the dynamics that drive short-term variations in crop prices.

Jacob Schewe from the Potsdam Institute for Climate Impact Research in Germany and his colleagues used world wheat production figures to build a simple supply and demand model, and simulate the observed wheat prices over the last 40 years.

The researchers found that they could simulate even the price spikes of 2007/8 and 2010/11 if they took countries' trade policies and storage strategies into account. External drivers such as oil prices or speculation on commodity markets were not needed to capture the main trends.

“We show that weather events are one of the most important drivers, but that storage of crops can attenuate the weather effect, and models have to include storage to properly reproduce price variation,” said Schewe, who published the findings in Environmental Research Letters (ERL).

For example, droughts in the Ukraine, Australia and India were the main triggers of the 2007/8 price spike. Panic buying by importing countries in response to the reduced yield, and export restrictions in some of the drought-stricken countries, further amplified the price rise. By including a dynamic storage term in their model, Schewe and his colleagues were able to account for export restrictions and import policies, and the model reproduced the variability with greater accuracy than previous studies.

Looking to the future, as droughts become more frequent and severe under climate change, the likelihood of this kind of price spike could well increase. So finding ways to mitigate against such spikes will become even more pressing.

“Having more crop storage facilities and co-ordinated storage policies between countries could help to avoid panic buying and associated price spikes,” said Schewe. “In addition, mitigating climate change is important to avoid more detrimental weather effects on crop production in the first place.”

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