Hot dry spells and extreme rain increased corn and soybean prices in the United States Midwest

Abstract

The United States Midwest produces one-third of the global corn and soybeans. However, crop yields and prices are sensitive to extreme weather events, such as drought and extreme rainfall. While the impact of extreme weather on crop yields has been explored, the impact on crop prices is less understood. Here, we utilize weather, crop, and price data from 1971 to 2019 and analyze how changing weather patterns and extreme weather events in the United States Midwest have impacted crop valuation at the Chicago Mercantile Exchange. We find that regional summer rain increased between 1971 and 2019, while extreme temperatures remained stable on average. Hot dry spells and excessive rain in the summers of 1971–2019 contributed to contemporaneous price increases for soybeans and corn. Predicted market responses to weather shocks were, in extreme cases, comparable to a 10% price increase. The market impact of excessively wet spells gained strength in later decades. Our analysis and findings have important implications for the agricultural supply chain and for crop market participants.