Climate change, economies and market dynamics
My whirlwind series of presentations continued in Argentina this weekend with a presentation on climate change and agriculture in Latin America to a group of agricultural economists in San Luis, Argentina. The event is a “mini-conference” on Latin American agricultural economy, organised by the Argentinian Association of Agricultural Economists.
I presented some new and emerging work on climate chage impacts in the Andes, and the economic costs to production value for 5 important food crops. There’ll be more on that on this blog in the next couple of weeks.
There was an interesting discussion about the market implications of climate change, which also links in with some recently released research from friend and colleague Andy Challinor on crop failures and market prices. In his paper, Andy shows that crop failures are likely to increase into the future as climate change causes greater extremes in climatic events. This can cause all sorts of major market dynamics in food prices and distribution. Look no further than the failures in Russian wheat due to high temperatures this year, and the resultant impacts on global food prices.
So we are to expect greater crop failures, which will create greater volatility in market prices. CIAT’s own research also shows that crop production and distribution is likely to change, meaning that there will be shifts in where food comes from, and changes in the volume entering global markets. No doubt that will create greater volatility.
But we also talk about adaptation so that all these negative impacts are to some extent avoided. Adaptation needs to occur from the farm- level through to the national, regional and international policy level. As part of that, surely we need to rethink how markets work. The Economist outlines three things that need to change:
1. Remove agricultural subsidies in developed countries
2. World insurance/policies against export bans during food shortages/crises
3. Global food stock system, perhaps managed by the UN World Food Program
I would add to that a shift in private sector market policies. We need to rethink the business models for sourcing agricultural goods, and develop new financing plans for adaptation that flow funds through value chains. Ensuring “whole-chain” adaptation should not only protect producers themselves, but also consumers from price spikes and the different public and private institutions involved in the food system. Perhaps climate change is the shock that the markets need to restructure themselves into providing a more resilient global food system. How can we ensure that this change happens in a way that doesn’t cause more food price woes? Let me know – would love to hear your ideas.