The effects of climate on corn price movements in the United States

Corn is the 1st economic field crop in the world, whose price stability guarantees sustainable and equitable food security. Most previous farm commodity price prediction model only focus on detecting the autoregression of historical transaction, while ignoring other factors. For agricultural commodities, different climate condition leads to different harvest situation, thus bringing volatility to prices. Therefore, it is reasonable to propose a method based on climate indices to measure the degree of their influence on price fluctuation.

A multiple regression model is developed for predicting corn price movements at the nation level. The June-September season is selected to target the essential growing stages of corn which are especially sensitive to drought, high temperature stress and water stress. In order to describe the movements of price, the price difference between June and September is chosen as the dependent variable. Daily climate data are obtained from PRISM which integrates both satellite and meteorological station observation data, and monthly price data are sourced from USDA. 39-year trend from 1981-2019 is explored to construct a predictive model. The results show that the accuracy of predicting up and down of price is 85%. Specifically, temperature in July has an identifiable effect on price movements which explains 36.99% price variation. These results imply that during the key growing period, climate indices occupy an important position on improving crop price forecast ability.