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How Will Corn Markets Adapt to Climate Change?

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Read this piece.  It suggests that we will face increased “fat tail” risk in the future as climate change will raise the probability of several different corn regions having low output crops.  How will capitalism help us adapt to this potentially serious problem?

1.  Storage.  Don’t forget Hotelling’s Rule.  Expected high prices in the future create incentives to store the commodity during boom times.  Here are some technical details on corn storage. You have to lower the temperature and keep creatures out of the silos.  Capitalism can figure this out.   We have plenty of land for placing these storage centers.

2.  Futures markets — if corn futures go further into the future, then the basic Grossman and Stiglitz (i.e Hayek ) logic will unfold and entrepreneurs will follow these new profitable opportunities.  I see that this corn futures market only goes out to December 2019.  Why doesn’t it go further out into the future? In the future, will it go out further into the future?

3.  Substitution possibilities on the demand and supply side.  Who consumes this corn?  What else could they consume?  On the supply side, where else can we grow corn?

Notice that I haven’t even mentioned GMO corn here.

I don’t doubt the new risks that corn growers will face due to climate change but I have sketched out thousands of new adaptation margins.


Source: http://greeneconomics.blogspot.com/2017/07/how-will-corn-markets-adapt-to-climate.html


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